What is GDP in the economy? Gross domestic product

A typical person without an economic education can not easily understand what GDP is. In the economy, this indicator plays a very important role. Based on it, you can assess the level of economic development of the state and its competitiveness in the international market.

Gross domestic product (GDP) is the aggregate of all goods (goods and services) produced by residents in the territory of a certain country during the year expressed in prices of the final product.

Simply put, the gross domestic product is the total quantity of all goods and services produced by all enterprises and organizations of the country for a certain reporting period (most often a calendar year is estimated).

What is GDP in the economy?

This indicator is very important in assessing the performance of the country's economy. The gross domestic product characterizes the growth rates and the level of its development. Often, the GDP indicator is used to assess the standard of living of the population of the state. The higher this indicator, the higher the standard of living is considered (the relationship between the indicators does exist, but other, more specific economic indicators should be used).

Nominal and real gross domestic product

The indicator of GDP can be of two types:

1. Nominal (calculated in the prices of the current period).
2. Real (calculated at the prices of the comparable previous period). Most often for comparison, the prices of the previous year are taken.

The calculation of real GDP makes it possible to level out the effect of rising prices on this indicator and to determine the net growth of the state's economy.

Most often, the GDP indicator is calculated in the national currency, however, if it is necessary to compare the respective values of different countries, it is possible to transfer it to another currency at the relevant exchange rates. The increase in GDP in the world scale is as follows (2013).

Income (distribution) method of calculating GDP

What is GDP in the economy? This, firstly, is an indicator based on the assessment of the profitability of owners of production factors. The calculation is by summing them. At the same time, the following are the components of GDP:

• W - the total amount of wages paid to all employees of the country (both residents and non-residents);
• Q - the amount of deductions for social insurance of the population;
• R - profit (gross);
• P - mixed income (gross);
• T - taxes (on imports and production).

Thus, the calculation formula has the form: GDP = W + Q + R + P + T

Expenditure (production) method

The population of the country in the course of its labor activity produces different types and forms of the final product (meaning specific goods or services that have a certain value). It is the aggregate of the population's expenses for the acquisition of final products of labor activity that will constitute the gross domestic product. When calculating the GDP, the production method summarizes the following indicators:

• C - expenses of the country's population for consumer needs;
• Ig - private investment inflow into the economy of the country (gross);
• G - state purchases (purchase of goods and services by the state)
• NX - net exports (the difference between exports and imports of the state).

GDP is calculated by the formula: GDP = C + Ig + G + NX

Calculation of value added

The Institute of Economics allows the calculation of the amount of GDP by adding value. This method allows you to obtain the most accurate GDP indicator, since it throws away intermediate products, which by mistake can be counted as final in the previously considered techniques. That is, the use of calculating the value added makes it possible to exclude the possibility of double accounting. Summing up the indicators of the added value of all goods and services in the country, it is possible to calculate GDP reliably. This is because the value added is the market value of the product, minus the cost of materials and raw materials purchased from suppliers.

GDP per capita

One of the most significant and indicative indicators of the level of development of the state economy. It is determined by dividing the total GDP by the number of residents of the country and shows how many products were produced for a certain period on average for each citizen of the state. Also this indicator is called "per capita income".

Also commonly used indicator of economic development is the gross national product (GNP), which summarizes the final product produced both on the territory of the country and outside it. The main condition is that the producer of the products is the residents of the given state.

What is GDP in the economy and its role in analyzing the changes that have taken place, we have already studied. So what are the real GDP indicators of the countries of the world today?

Rating of countries by nominal GDP

This rating is made on the basis of the rate of nominal GDP translated into dollars at the market (or set by the authorities). The world economy is structured in such a way that this indicator for developing countries is somewhat understated, and for developed countries it is too high. This is due to the fact that the difference in the cost of homogeneous products in different countries is not taken into account.

So, the top ten, according to the IMF for 2013, looks like this:

Rating of countries by nominal GDP per capita

The level of GDP per capita is indicative, but not the most accurate indicator characterizing the economy, since it leaves unaccounted for the specifics of the sectoral development of the economy, the costs of production, its quality, and other equally important elements of the economic system.

The list of the 10 countries with the highest GDP per capita, according to IMF data for 2013, looks like this:

The problem of the slowdown of Russia's economic growth

World crisis processes, as well as a number of subjective economic factors caused that in 2013-2014, the Russian economy also weakened somewhat. GDP, respectively, grew at a very low pace. Thus, according to Alexei Ulyukaev, who holds the post of Minister of Economic Development of the Russian Federation, 2013 was the worst for the Russian economy after the crisis year of 2008. During this period, Russia's gross domestic product grew at a much slower pace than expected. So, the expected rate of GDP growth was reduced by the department from 3.6% at the beginning of the period to 2.4% in June and, finally, 1.4% in December.

The situation in industry also remained deplorable. If there was still a small increase in the mining industry, the processing one even showed a certain decline. Inflation also reached 0.5% more than expected.

The causes of crisis phenomena in the Russian economy

Thus, one can see signs of stagnation in the Russian economy. There are objective reasons for this, which can be divided into 2 groups: internal and external.

Internal factors

1. The economy has a raw material model. With this model, the main share of the economy's revenues is formed by the export of raw materials, which eventually becomes exhausted. Also, the volumes of domestic manufacturing and its competitiveness are declining.
2. Problems with investment attractiveness. The most important condition for the development of individual regions of the country is the availability of investment in the real sector of the economy. To date, many foreign investors are puzzled by the insufficient protection of possible financial injections. Therefore, it is necessary to take measures to create a modern regulatory and legal framework, as well as to promote international integration processes.
3. High costs of business projects. These are excessive spending on fixed assets, wages, rent of premises and territories, as well as related production costs. It is necessary to carry out a set of measures to reduce the corresponding costs.

External factors

1. The general economic recession in Europe. The development of the world economy is cyclical and is accompanied by recessions and ups.
2. Decrease in exports (both in value and in physical terms). It is caused both by the European economic recession and by the exhaustion of the raw material model of the development of the national economy.

Thus, in order to overcome the crisis in the economy, it is necessary to reorient industry, improve the investment climate, and hope for an improvement in general trends in the global economy.