Q. What do you mean by Gross domestic product?
Perhaps the most significant concept in macroeconomics is Gross Domestic Product (GDP):
|
Gross Domestic Product (GDP) is expressed as the market value of all finished goods and services produced in a country during a particular period of time
|
Note that we only embrace finished services and goods- which is, anything which is sold directly to the consumer. Electric power sold to a steel mill isn't included whereas all the electric power sold directly to consumers is included. Reason is simply that we want to avoid 'double counting'. Consider for illustration the production of cars. Car producers have parts produced by other firms that in turn have parts delivered by other firms and so on. If we were to count the value of everything produced by a firm, then most parts of a car will be counted many times. This is why only the value of finished car is used in the calculation of GDP. Note, though, that if a firm buys a robot which it uses in the production of cars, then this robot is counted (if it is produced in same country). Car producer is then 'final consumer' of the robot - no value is added to it and it isn't resold to another firm.