Today in the media you can increasingly hear the opinion that GDP is an indicator that, in fact, does not mean anything. How is this so? After all, all countries are sure to count it? Doesn’t GDP growth mean automatically improving the welfare of a nation? In order to understand this issue, let's find out how this indicator is calculated.
To begin with, it should be mentioned that GDP is the total value of all goods and services rendered by residents and non-residents of a given country on its territory for a certain period of time (most often for a year). In order to take inflation into account, economists can consider the final cost both in real prices and in base ones. There are several basic methods for calculating this indicator.
The production method for calculating GDP is actually an assessment of this macroeconomic indicator by taking into account all products in the broad sense of the word, but without their repeated counting. It should be noted that we are talking here only about the final goods and services. But each time, researchers cannot delve into the question of how are the products sold? Therefore, an indicator was invented, which is called value added. It represents the difference between the market price of a given product and the cost of materials that the company spent on its production. GDP - this is the sum of the added values that were produced in the country for a certain period.
Another way is the method of calculating this indicator by expenses (by the flow of goods), it involves summing up the costs of various business entities for the acquisition of the final product that they need. In this case, GDP is the result of addition of consumer incomes of the population, gross private investment in the economy, the volume of state purchases of goods and services, as well as net exports.
You can also calculate this indicator by income. This method is also called distribution. In this case, the GDP of Russia or any other country is the sum of wages, interest, profit and rent, that is, factor income, of all economic entities that operate on the territory of that country. It is important to understand that the income of both residents of a given country and non-residents is taken into account. Direct and indirect taxes and depreciation should also be included in the calculation of this indicator, because the expenses of some business entities are the income of others.
In addition to GDP, macroeconomic analysis involves the determination of gross national product (GNP). This indicator differs from GDP in that it takes into account only services and products produced by residents of a given country both on its territory and abroad. For its calculation, similar methods are used. GNP is GDP plus the difference between factor incomes of residents abroad and non-residents operating in the country. Also, economists usually determine the potential GDP, which involves the full use of all resources available to the state, including labor, as well as a stable price level. It is important just to analyze inflation and the problems of this phase of the economic cycle.
