Gross Domestic Product (GDP) is a measure of the economic performance of a country. It is the monetary value of all goods and services produced within a country’s borders in a specific period of time, typically a year.
There are three methods to calculate GDP:
Expenditure method: This method calculates GDP as the sum of all final expenditures made on goods and services within a country during a given period. This includes consumption expenditure, investment expenditure, government expenditure, and net exports.
Income method: This method calculates GDP as the sum of all factor incomes generated in the production of goods and services during a given period. This includes wages, profits, interest, and rent.
Production method: This method calculates GDP as the sum of the value added at each stage of production of goods and services during a given period. Value added is the difference between the value of inputs and the value of outputs at each stage of production.
These three methods should yield the same GDP figure, as they are all measuring the same thing from different angles. GDP is a widely used indicator of economic growth and is used by governments, businesses, and individuals to measure economic performance and make decisions.
