What is GDP or Gross Domestic Product ?
GDP or Gross Domestic Product is the total value of all the final goods and services produced within the domestic boundaries of a country during a year. It can be calculated at Market Price or Factor Cost. Gross in Gross Domestic Product means that the total value of final goods and services includes depreciation, i.e., no provision has been made for it. ‘Domestic’ in Gross Domestic Product means that the final goods and services produced are located within the domestic boundaries of the country. ‘Product’ in Gross Domestic Product indicates that only final goods and services are included. Market Price in GDP at MP means that the amount of indirect taxes paid is included in GDP; however, the subsidies are excluded from it. However, ‘Factor Cost in GDP at FC’ means that the gross total value of all the final goods and services is included.
GDP can be of two types: Real GDP and Nominal GDP. Real GDP is the Gross Domestic Product of a country of a given year, estimated on the basis of the price of the goods and services of a base year. However, Nominal GDP is the Gross Domestic Product of a country of a given year, estimated on the basis of the price of the goods and services of the same year. The formulas for calculating Real GDP and Nominal GDP are,