What is Gross Domestic Product and What is Its Function?

In a country or territory, the GDP or Gross Domestic Product is the market value of all the goods and services produce by labor and property in that country/region in one year and it is the monetary value of a region’s/country’s goods and services in a span of a particular period of time, such as a year. Usually, increase in GDP also equates to increase in standard of living but not necessarily in increase of purchasing power of its people, if the reason for growth in GDP is increase or high inflation or population growth. Stable increase of Gross Domestic Product is a good example of stability and reliability of the region economy. Positive GDP is determined by growth of labor force and the capital stock, which is in pace with the technological advancement. On the other hand a negative GDP implies that the country has a higher unemployment and lower standard of living of its people. Gross Domestic Product is usually a big factor in assessing the country’s economy, is used by investors, financial institution and other institution.
There are 3 approaches in calculating Gross Domestic Product GDP. Expenditure approach- GDP is the sum of the consumption and investment plus the country’s spending plus the output in export(less the imports).
Product approach or the market value of the goods and services produced in a year.
Income approach or the total of all the income collected by all the producers in a year: This equates to the compensation of employees (wages, salaries including the contribution to social security) plus the profits (gross operating surplus) plus the Gross mixed income (small business).
These 3 are all equivalent, each having the same result. World top 10 –Gross Domestic Product 2003-2004
1. U.S.A- with a 10,082 billion US dollar Composition by sector on GDP of USA Agriculture: 0.9% industry: 20.5% services: 78.5%
2. China- with a 6,000 billion US dollar Composition by sector on GDP of China Agriculture: 11.3% industry: 48.6% services: 40.1%
3. Japan- with a 3,550 billion US dollar Composition by sector on GDP of Japan Agriculture: 1.4% industry: 26.5% services: 72%
4. India- with a 2,660 billion dollars Composition by sector on GDP of India Agriculture: 17.6% industry: 29.4% services: 52.9%
5. Germany- with a 2,184 billion dollars Composition by sector on GDP of Germany Agriculture: 0.8% industry: 29% services: 70.1%
6. France- with a 1,540 billion dollars Composition by sector on GDP of France Agriculture: 2.2% industry: 21% services: 76.7%
7. United kingdom- with a 1,520 billion dollars Composition by sector on GDP of United Kingdom Agriculture: 0.9% industry: 23.4% services: 75.7%
8. Italy- with a 1,438 billion dollars Composition by sector on GDP of Italy Agriculture: 1.9% industry: 28.9% services: 69.2%
9. Brazil- with a 1,340 billion dollars Composition by sector on GDP of Brazil Agriculture: 5.5% industry: 28.7% services: 65.8%
10. Russia- with a 1,270 billion dollars Composition by sector on GDP of Russia Agriculture: 4.7% industry: 39.1% services: 56.2%