Question

In your own words, what is Gross Domestic Product (GDP)? Why is it so important to economists and investors?

Answer 1

GDP talking in simple terms is the Gross Domestic Product

It is the production of final goods and services within the boundary of a country in a financial year

It does not take any intermediate goods

It is generally calculated on quarterly or yearly basis

It is very important for every economy to show the data of GDP because it tells that where the country standing

It takes 4 main components in the calculation that are consumption, investment ,spending and net export

Where net export is a difference of export and import

It is generally measured in nominal and PPP terms

Many economists and investors consider this data as very important to compare the different economics across the world and classify them into different categories like under developing ,developing or developed economies

For example, India with around $2.9 trillion GDP is considered to have developing economy while United States with having GDP of around $19 trillion is considered to be developed economy

But many economists and investors also does not see it as a complete word for defining any economy as it lacks so many important factors

For example standard of living, happiness index, Gini coefficient etc.