About that that such gross national product, the formula of calculation, and also as to analyze changes

The news is often said about the projected fall or growth of the gross domestic product of various countries. We will understand what GDP means, the formula for calculating what it represents, and also what kinds of this indicator exist.

The concept of

GDP is the gross domestic product. This indicator is used to assess the economies of different countries. The gross domestic product displays all the products produced and services provided by the country for which it is calculated. The formula for calculating GDP includes all goods and services that were produced or provided in the state.

Usually, the gross domestic product is calculated for 1 year. In Russia, it is calculated in rubles, and if you need to compare the indicator with other countries, then mathematically convert it into US dollars.

There are several types of GDP, the formula of calculations for each of them has its own, and they are designed to better reflect the situation of the economy taking into account various factors.

About the nominal gross product

Nominal GDP is a standard indicator for mapping the dynamics of the development of the state economy. Its value depends on the volume of production, as well as changes in the level of prices for manufactured products.

Nominal GDP, the formula of which is given below, can not be used to compare the development of the economies of different countries. In addition, it will not be suitable for comparing the economic development of the same country in different periods.

It is calculated as the sum of all products produced and services rendered within the country:

Nominal GDP = Σ of the country's output + Σ of services provided.

Real GDP, the formula of its calculation and the conclusions that can be drawn

Real GDP shows the volume of output and services provided, taking into account inflation. This type of indicator is more approximate to understanding the real state of the country's economy and production level

There are such cases, that GDP increases by several percent during the year, and inflation growth over the same period is more than 10%. And this indicator shows that the state of the economy is deteriorating, even despite the growth in production volumes. That is, to see the real picture, take into account the inflation processes in the period under study, it is necessary to use real GDP.

The formula for calculating real gross domestic product :

Real GDP = nominal GDP / total price level.

Using the price index, you can calculate their overall level, which is used in calculating real GDP. Often, CPI (consumer price index) is used as a price index. CPI can be calculated on the basis of the cost of products that are included in the consumer basket.

There are also real GDP calculations based on the PPI (producer price index). This indicator differs in that only the produced goods are included in the calculation, without taking into account the services rendered. Only manufacturers' prices are used.

This indicator is usually calculated by state statistics bodies around the world, as well as by private companies that analyze the state of the economy.

The gross domestic product at purchasing power parity

To calculate this indicator, use the following formula for calculating GDP:

Gross domestic product by purchasing power parity = Nominal GDP in US dollars / number of inhabitants of the country.

This indicator is very doubtful, although it is used to compare the economies of different countries. With its calculation, economists conventionally use the principle of purchasing power parity. According to him, in the different countries you can buy the same goods for the same price with the correct conversion of the exchange rate of different national currencies.

To date, the leader in the development of the economy in this indicator is China, which has recently bypassed the eternal leader - the United States.

About the GDP deflator

The deflator of the gross domestic product is a special GDP index, the formula for calculating which is the following:

GDP deflator = (Nominal GDP in current year prices / Real GDP) * 100% in base year prices.

The calculation is based on current prices in the consumer basket, in contrast to the consumer price index, based on the prices of the base period.

It is necessary to pay attention to the fact that the calculations take into account all goods and services that the country has produced. Also, the index does not include goods that have been imported.

Using this index, inflation can not be fully taken into account. When analyzing the deflator, it is necessary to realize that it takes into account new products and services that might not have been in the base period.

GDP is the most important indicator of the state of the country's economy

Due to the analysis of the dynamics of all types of gross domestic product, one can judge the state of the national economy of the country. For example, if only the nominal gross domestic product has increased, then this does not mean that production has grown. It is necessary to check the growth with real GDP, which will show the result of economic growth, adjusted to the level of inflation.

And in order to compare the economy of different countries, it is better to use the gross domestic product, which will take into account the purchasing power parity. After calculating the gross domestic product per person, you can understand the efficiency of production and compare different countries by population.

It is clear that if the country's real gross domestic product is constantly growing, this indicates an increase in the welfare of each of its citizens, as well as an increase in their purchasing power. And if the indicators of the gross domestic product are continuously falling, the government should think about the reasons.