GDP is the Gross Domestic Product, or the broadest quantitative measure of a nation’s total economic activity. The GDP is a representation of the monetary value of all goods and services that have been produced within a nation’s borders over a period of time. How do we figure GDP? Follow these steps to find the equation.
Step 1: Figure out the nation’s personal consumption. This includes durable goods, or items expected to last more than three years; nondurable clothes such as food and clothing; and services.
Step 2: Figure out the government expenditures. This will include costs for defense, roads and schools.
Step 3: Next is the nation’s investment spending. Entailed in this figure are nonresidential (plants and equipment), residential (single- and multi-family homes) and business inventories.
Step 4: Find the amount for net exports. Exports will be added to the GDP and imports will be deducted.
Step 5: Use the following equation to find the GDP: Consumption + Government expenditures + Investment + Exports - Imports. Now you have your figure.
Tips
- GDP also includes inflation data. For example, changes in prices and spending patterns.
Items Needed
- Consumption
- Government expenditures
- Investment spending
- Net exports and imports
- Calculator