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Introduction

GROSS DOMESTIC PRODUCT

Gross domestic product (GDP) is the market

value of the final goods and services produced

within the domestic territory of a country by

all producers domestic and foreign during

one year inclusive of depreciation..

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How to calculate GDP

GDP = consumption + investment + (government spending) + (exports-imports)and the

GDP = C + I + G + (X-M)

Where,

C stands for consumption which includes personal expenditures pertaining to food,households, medical expenses, rent, etc

I stands for business investment as capital which includes construction of a newmine, purchase of machinery and equipment for a factory, purchase of software,expenditure on new houses, buying goods and services but investments onfinancial products is not included as it falls under savings

G stands for the total government expenditures on final goods and services whichincludes investment expenditure by the government, purchase of weapons for themilitary, and salaries of public servants

X stands for gross exports which includes all goods and services produced foroverseas consumption

M stands for gross imports which includes any goods or services imported forconsumption and it should be deducted to prevent from calculating foreign supplyas domestic supply

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Importance of Calculating GDP

Calculating GDP is extremely important has theperformance of the economy is fixed by means of thismethod. The results would help the country to forecastthe economic progress, determine the demand and

supply, understand the buying power of the people,the per capita income, the position of the economy inthe global arena. The Indian GDP is calculated by theexpenditure method.

By Calculating GDP the performance of the Indian

economy can be determined. The GDP of the countrystates the number of goods and services produced in afinancial year. It is the yardstick of measuring thefunctioning of the economy.

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GDP components and sub categories

National income

components Sub-category Examples

Consumption Durable goods refrigerators, air conditioners, furniture

Non-durable goods food,clothing

Services medical care ,transport

Investment(I) Residential fixed New homes, Additions and alterations

Non-residential fixed Factories, office Buildings,plant&Machinery

change in business

inventories Agricultural manufacturing,wholesale,retail

Net exports(X-M) Exports

Goods and

services

Imports

goods and

services

Govt.Expenditure(G) Federal,state and local Defence,Education,police

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GDP AND MANAGERS

GDP is one of the most often cited economic

indicators by business managers .

Real GDP growth is a summary of theeconomys general condition

Increasing real GDP suggests an expanding

economy while declining real GDP signifies

recession.