Understanding of Gross Domestic Product (GDP)

Understanding of Gross Domestic Product (GDP)
Gross Domestic Product (GDP), in the sense that by definition the experts say that the notion of Gross Domestic Product (GDP) is the number of goods and services produced by the production units on an area at a given moment. Gross Domestic Product (GDP) is a gauge of economic growth where the economic growth gauge is GDP, GDP per capita and Revenue per Hour Work. As a gauge of economic growth GDP has the formula for finding GDP and GDP also have four components as follows:

Gross Domestic Product Components
a. Household consumption
b. Investation
c. Government consumption
d. Net exports, which is the difference between total exports and imports.

Formula Looking for GDP
Based on these components, then formulated:

Gross Domestic Product


PDB = C + I + G + (X-M)

Information :
C: Household consumption
I: Investment
G: Government consumption
X: Export
M: Import

From the formula, it can be explained that if consumption increases food will affect the GDP will also increase. So also with investment, government expenditure, and net exports if the increase then the number of GDP will increase, this is because the components are in a linear function. Therefore, every country always tries to increase consumption, investment, government expenditure, and net export value.

Roughly GDP can be a measure of the economic welfare of a country, but this measure is not too precise. Why is it not appropriate because if we only see the GDP, the calculation still ignores the population factor.

That article about Understanding Gross Domestic Product (GDP) may be useful

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