Full Form Of GDP

What is the full form of GDP?

GDP stands for Gross Domestic Product, the overall monetary (consumer) value of finished goods and services produced within the boundaries of a nation over a given time. It is the measure of the overall domestic output, a detailed scorecard of a country’s economic health. Economists refer to GDP when they speak about the size of the economy. GDP growth rate is an important method to measure the economic growth of a nation.

An increase in GDP means better living standards for the people living in that nation. A country with high GDP is a better place to live in. The three important sectors that contribute to India’s GDP are agriculture, manufacturing, and service.

History of GDP

The concept of GDP was given by William Petty in order to defend the landlords from unfair taxation between 1652 and 1674 between the English and the Dutch. This concept was further developed by Charles Davenant and Simon Kuznets established its modern form in 1934. In 1994 after the Bretton Woods conference it became the principal tool for measuring a country’s economy.

Different Ways to measure GDP

Following are the three methods to calculate GDP:

1. Income System

It estimates the overall revenue that production factors (labor and capital) recieve within a country’s national boundaries.

GDP = A + T – S

where,

A is GDP at Factor expense

T is Taxes

S is Subsidies

2. Output System

It measures the market value of all goods and services that are produced within the borders of the country. Measuring GDP at constant prices or actual GDP prevents skewed calculation of GDP due to price level adjustments.

GDP = B – T + S

where,

B is GDP at a constant prize (real GDP)

T is Taxes

S is Subsidies

3. Expenditure System

Testing expenditure on goods and services that all individuals within a country’s domestic boundaries sustain.

GDP = C + G + I + NX

where,

C is Personal consumption expenditure

I is Business investment

G is Government spending

X is Exports

M is Imports

NX is (X – M), net export