GDP Full Form, What is GDP?

GDP full form Gross Domestic Product.

Gross domestic product (GDP) is a monetary measure of the market value of all the final goods and services produced in a period of time, often annually.

Written out, the equation for calculating GDP is: GDP = private consumption + gross investment + government investment + government spending + (exports – imports). For the gross domestic product, “gross” means that the GDP measures production regardless of the various uses to which the product can be put.

Importance of GDP:

1.      GDP is one of the primary indicators used to gauge the health of a country's economy.

2.      It represents the total money value of all goods and services produced over a specific time period.

3.      Usually, GDP is expressed as a comparison to the previous quarter or year. For example, if the year-to-year GDP is up 3%, this is thought to mean that the economy has grown by 3% over the last year.

4.      The calculation can be done in one of two ways: either by adding up what everyone earned in a year (income approach), or by adding up what everyone spent (expenditure approach). Logically, both measures should arrive at roughly the same total.

5.      What GDP represents – have a large impact on nearly everyone within that economy/geography. For example, when the economy is healthy, you will typically see low unemployment and wage increases as businesses demand labor to meet the growing economy.

6.      A significant change in GDP, whether up or down, usually has a significant effect on the stock market. It's not hard to understand why; a bad economy usually means lower earnings for companies, which translates into lower stock prices.

7.      Investors really worry about negative GDP growth, which is one of the factors economists use to determine whether an economy is in a recession.