What is the use of economy

gross domestic product

The gross domestic product (GDP) corresponds to the value of all goods and services that are generated in one year by domestic and foreign companies, households and the state within a country or an economic area - provided these are not used as intermediate consumption for the production of other goods and services become. The change in GDP is the most important variable for measuring economic growth.

Nominal vs. real GDP

The so-called nominal gross domestic product is calculated on the basis of current prices ("at current prices"). However, this value only provides an imprecise basis for assessing economic growth, because nominal GDP increases even if only prices rise therefore the real gross domestic product is considered, i.e. a GDP adjusted for price changes.

Types of calculation

There are three GDP calculations in national accounts:

  • Production calculation
    It shows the economic sectors in which GDP was generated.
     
  • Usage calculation
    Another way of calculating GDP is on the demand side. In the context of the usage calculation, the expenditure for goods and services is determined, i.e. private and state consumption expenditure, investments as well as external contributions.
     
  • Distribution calculation
    It provides information on the level of the different incomes that arose in the production process (wages and salaries of employees on the one hand, profits of the companies on the other).