What is the full form of GDP?

The full form of GDP is Gross Domestic Product. GDP is the total financial or consumer value of all finished goods and services produced within a country’s borders during a specific period. It acts as a precise gauge of total domestic output and a comprehensive report card on the state of a nation’s economy. 

GDP is the term used by economists to describe the size of the economy. The GDP growth rate is an important indicator of a nation’s economic development. In that country, people’s living standards are steadily growing along with GDP growth. A nation with a high GDP is considered ideal for livability. Three key industries in India contribute significantly to GDP; agriculture, manufacturing, and service.

Between 1652 and 1674, William Petty developed the fundamental ideas of GDP to protect landlords from undue taxes by the English and the Dutch. Charles Davenant later improved on this strategy. Simon Kuznets originally developed their contemporary idea in 1934. Following the Bretton Woods conference in 1944, it was adopted as the main indicator of a nation’s economic performance.

There are several ways to calculate a country’s GDP, and it’s important to understand each one and how it’s applied. The three methods to compute GDP are as follows.

The income technique calculates the total income that labour and capital, the two main production elements, earn inside a nation’s borders. 

GDP = A + T – S

Where,

A = GDP at Factor expense

T = Taxes

S = Subsidies

The market value of all commodities and services produced inside the nation’s borders is calculated using the output system. GDP is calculated at constant prices or actual GDP to avoid a skewed calculation due to price level changes. The output system suggests,

GDP = B – T + S

Where,

B – GDP at a constant prize or real GDP

T – Taxes

S – Subsidies

Testing expenditure on goods and services incurred by every person inside a nation’s domestic boundaries is included in the expenditure system. The expenditure system indicates,

GDP = C + I + G + NX

Where,

C – Personal consumption expenditure

I – Business investment

G – Government spending

X – Exports

M – Imports

NX = (X – M), which is a net export.