For those who follow economic news, the abbreviation is familiar, and the question of what GDP is before such people is not. For those who do not know its decoding, we can only advise correcting this misunderstanding, because GDP shows the general well-being of the country. In order to further improve this indicator, the economic literacy of the population should increase, because the greater its value, the more money is in the state, and the more potential needs can be satisfied. This additionally raises the question of the distribution of money so that the maximum number of needs are met, but this is a separate case. So, we turn to the answers to the question of what is GDP and how is it measured.
How is GDP decrypted and what does it mean?
Decryption is very simple - gross domestic product. In other words, everything that was produced on the territory of a particular country. It is used to calculate material goods that were made by residents of the country for the purpose of subsequent sale both in the country and abroad. The cost of all products ready for sale is taken into account. So, if semi-finished products are manufactured at one enterprise for subsequent use at this very enterprise to create the final product, then the cost of the products is not considered in the gross domestic product, but only the cost of the final product. It is easy to remember this small definition, so that, if necessary, give an answer to the question of what GDP is.
Why calculate the GDP, and who does it?
The gross domestic product is calculated in order to know the approximate economic situation in the country, and also so that the government can, based on real economic power, plan future development. When calculating, everyone needs to remember that real GDP is equal to the value of all manufactured and ready-to-eat products that are sold or can potentially be sold to various individuals or legal entities. Conventionally, everyone who calculates GDP can be divided into 2 types: state and private branch.
The state is represented by the statistics committee and various services whose responsibilities include the collection of statistical data (tax service, etc.). On the private side, various banks that calculate their own data based on open sources of information. Unfortunately, it is not possible to calculate the exact GDP due to the presence of the informal sector in the economy, which is not calculated, therefore they consider the approximate value. Also, there are frequent cases when the data of public and private counting services diverge, and up to 3 times the size. What is the peculiarity of calculating GDP? The bottom line is that the cost of production is calculated by territorial distribution.
In what units do they count?
To use the data locally, they are counted in national currency, and to represent the data in an international format, as a rule, US dollars are used. In some cases, during regional negotiations or a similar format of an organized meeting, they can use regional currencies.
Alternatives to Gross Domestic Product
Gross domestic product is not the only parameter by which the welfare of a particular country is assessed. As an alternative, GNP and HDI (gross national product and human development index) are used.The difference between a national product and a domestic product is that with it, incomes are considered not on a territorial basis, but on a national basis. That is, it is considered only how much was made by representatives of a particular nation. The human development index is based not only on economic indicators, but also on a number of social indicators, which consider the possibility of a person realizing his capabilities in society, regardless of origin.
There is one more, so to say, exotic method of evaluating ANS - gross national happiness. A rather interesting parameter, which, despite its unusual nature, is nevertheless introduced in one country in the world - the kingdom of Bhutan. The fact is that Buddhism is adopted as an ideology in the country, and the main goal of the state should be the common happiness of all citizens, which is even enshrined in the country's constitution. A rather interesting parameter, which, perhaps, can be seen in the society of the future.
Conclusion
I would like to finally give a few warning words: in order to be able to live in a well-developed country, to provide a comfortable life for the country's population and each individual individually, it is necessary to increase the economic literacy of the population. If you read these lines, you can only rejoice and advise you to continue to engage in self-education. So the answer is given to the question of what GDP is and how it is measured.
