A region's gross domestic product, or GDP, is one of the ways for measuring the size of its economy. The GDP of a country is defined as the market value of all final goods and services produced within a country in a given period of time. It is also considered the sum of value added at every stage of production of all final goods and services produced within a country in a given period of time. Until the 1980s the term GNP or gross national product was used in the United States. The two terms GDP and GNP are almost identical - and yet entirely different; GDP being concerned with the region in which income is generated and GNP (or GNI - Gross National Income) being a measure of the accrual of income to a region. The most common approach to measuring and understanding GDP is the expenditure method:
GDP = consumption + investment + (government spending) + (exports − imports)
"Gross" means depreciation of capital stock is not included. With depreciation, with net investment instead of gross investment, it is the net domestic product. Consumption and investment in this equation are the expenditure on final goods and services. The exports minus imports part of the equation (often called cumulative exports) then adjusts this by subtracting the part of this expenditure not produced domestically (the imports), and adding back in domestic area (the exports).
Economists (since Keynes) have preferred to split the general consumption term into two parts; private consumption, and public sector (or government) spending
· 1 decade ago