Gross domestic product

What is the GDP?

GDP (gross domestic product) or GDP (gross domestic product) is an economic indicator that shows the total value of goods and services that have been generated in the economic sphere during a period of time, in general, during one year.

This constitutes one of the main indicators for measure the increase in the production of organizations of a country, which reflects its economic level.

How is GDP calculated?

Gross domestic product is carried out by means of national accounting and, for its measurement, 3 methods are used: andl method of expenditure, production and income.

Expense method

This method is used in consumption, investment and exports. The formula to use is the following:

GDP through the expense method.

Where:

Method of production

The method of production is carried out in goods and services. The formula to use is the following:

PBI through the production method.

Where VBP is the gross value of production (total goods and services produced in a society) and CI is the domestic consumption of the country in question.

Entry method

This is obtained through the sum of salaries, consumption of fixed capital, net taxes (indirect taxes less subsidies or subsidies) and the operating surplus.

We call operating surplus to the income of the companies in question, profits of the entrepreneurs and indirect labor.

The formula to use for the income method is the following:

PBI through the income method.

Where RE are the remunerations, CKF is the consumption of fixed capital, II are indirect taxes, SB subsidies and EE the operating surplus.

Types of PBI

Among the types of GDP to be highlighted are the Nominal GDP, real GDP and GDP deflator.

Nominal GDP

This estimates the production, both of goods and services, at current amounts or prices; that is, at the price at which they are in the market.

In addition, it takes into account annual changes, either due to inflation or deflation.

Real GDP

Estimate the production of goods and services at invariable (constant) prices of a base year. That is, it eliminates the change in amounts over the years.

This is done to show the increase in production, since when prices rise in their normal advance, they alter the appreciation of GDP.

GDP deflator

It is the result between the two previous types mentioned, that is, between the nominal and the real. East measures the level of amounts in the economy.