JP WilliamsGross domestic product (GDP) refers to the market value of all final goods and services produced within a country in a given period.
It is the value of all final goods and services produced in a country in one year
It is often considered an indicator of a country's standard of living.
GDP is an indicator of a country's Standard of living, though it is not a measurement of the standard of living in a country.However, a country standard of living increases as its GDP increases.
It is used to measure the wealth of a country because it is essentially a measure of how much buying power a nation has over a given time period.
It can be used to gauge the overall output of a country's domestic factories.
- Measures of GDP typically exclude unpaid economic activity. This leads to distortions.
- GDP takes no account of the inputs used to produce the output.
- Comparison of GDP from one country to another may be distorted by movements in exchange rates.
- GDP does not measure factors that affect quality of life, such as the quality of the environment (as distinct from the input value) and - security from crime. This leads to distortions - for example, spending on cleaning up an oil spill is included in GDP, but the negative impact of the spill on well-being (e.g. loss of clean beaches) is not measured.
- GDP is the mean (average) wealth rather than median (middle-point) wealth. Countries with a skewed income distribution may have a relatively high per-capita GDP while the majority of its citizens have a relatively low level of income, due to concentration of wealth in the hands of a small fraction of the population. 0030 May 2011