What is gdp? What factors determine GDP?

Surely all of us have heard of GDP. However, how many of the testimonies really understood it. In the article below, let's learn about the factors that determine and affect GDP!

Table of Contents [Hide]

1. What is GDP?

2. Quick way to calculate GDP

3. What is the meaning of GDP?

4. Factors affecting GDP

1. What is GDP?

GDP stands for the English phrase "Gross Domestic Product", which means "gross domestic product" in Vietnamese. Or more specifically, GDP is the total value of goods and services produced within the geographical boundaries of a country during a specified period of time, be it a quarter, or 6 months, or 9 months, or 1 year. five.

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GDP is important in determining many other issues in our society today.

2. Quick way to calculate GDP

GDP is a factor related to many areas of life. However, there are also many ways to calculate GDP, here are a few ways for us to refer to!
Method 1: Calculating Total Expenditure (Expenditure Method) is one of the methods of calculating the gross domestic product (GDP) of a country.
Formula: GDP = C + G + I + NX

Inside:

– C (Household Expenditure): Includes all household spending on products and services.

– G (Government spending): Is the total expenditure on education, health, security, transport, services, policies…

– I (Total Investment): Is the consumption of investors, including expenditures of enterprises on equipment, factories, etc.

– NX: NX is the trade balance, the “net export” of the economy. NX = X(export [export]) – M (import [import]).

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Method 2: Calculating by income (Cost method) The method of calculating gross domestic product (GDP) is widely applied today. We can apply the following calculation:

GDP = W + I + Pr + Ti + De

Inside:

W (Wage): salary

I (Interest): profit

Pr (Profit): profit

R (Rent): rent

Ti (Indirect tax): net indirect tax
De (Depreciation): depreciation (depreciation) of fixed assets

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Method 3: Calculating by value added is also an effective method to calculate GDP more effectively.
Gross Domestic Product = Value Added + Import Tax

Or GDP = Value of production – intermediate costs + import tax

The added value of each economic sector includes:

- Producer's income such as salary, wages, in-kind money, insurance money, union money, etc.

- Production tax includes goods tax and other costs.

- Depreciation of fixed assets

- Surplus value

- Other income

3. What is the meaning of GDP?

With such a definition of GDP, how important is GDP in our lives. Let's find out together!

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>> GDP is a measure that reflects the economic growth rate of a country, showing the changes in the price of goods and services over a certain period of time. GDP is considered the most accurate measure of value.
>> GDP per capita also shows the average income of the people, thereby reflecting the entire quality of life, the standard of living of the people of each country, each household in that country.
>> A decrease in GDP will show economic recession, inflation and price stagnation, unemployment, directly affecting people's quality of life. When GDP is low, it means that the economy of that country is facing many problems, so from the GDP index, the government can make policies and measures aimed at improving and moving the economy forward. up again.

4. Factors affecting GDP

There are many factors that affect a country's GDP, but there are three typical influencing factors such as:
Population: GDP and population have a reciprocal relationship, based on population to calculate GDP per capita. Population is the labor force that creates material and is also the object of consumption of products and services. As the population grows, the contribution to GDP will be more calculated.
FDI: FDI index also affects GDP index. Long-term forms of foreign investment include money, materials, infrastructure, and means of production. But investment from foreign companies and corporations also contributes significantly to the country's economy. Giups solves the employment problem of many unemployed workers.
Inflation: Inflation is the loss of value of money, escalating prices, increasing continuously over time. Excessive inflation will lead to an economic crisis but is mistaken as an increase in GDP.

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The knowledge about GDP provided above will surely help you to have more new views as well as understanding about the impact of GDP on the economy as well as other factors in society. Discover more interesting and useful information only here! Thank you all for reading this article