what is gdp of an economy?

GDP stands for Gross Domestic Product. GDP is a unit that measures the value of all final goods and services produced within the domestic boundary of an economy within a given period of time (generally an year). Domestic boundary does not include any area in the country occupied as an embassy, or any area taken by the United Nations for its use. However, it includes a part of any country occupied by the said country in any other country to build its embassy.

The value taken to measure these products is the market value and not the factor cost. This is an important measurement index as it clearly shows the state of an economy by reflecting on its production.

Generally people confuse GDP with GNI (Gross National Income), but there is a big difference between the two. GDP on one hand measures all the products and services produced within a country, on the other hand GNI includes all the goods and services produced by the residents of the country whether within the domestic boundary or outside it. Thus the GDP and GNI of a country will remain same if all the production within the country is done by its resident only and also no resident owns any production unit outside the country.

While discussing the economic state of a country GDP is considered a very important index but there are a few things about a country that GDP does not reflect. For example, GDP never shows the inflation rate, economic welfare etc. Also it does not take into consideration the population of the country as well.

It is the value of all finished goods and sevices within the country for a specific period. GDP can be calculated in three way:

• Using expenditures
• Using production
• Using Income

GDP is used for measuring the economic activity.