In the view of a vast majority of the economists, gross domestic product (GDP) is the single most important economic indicator to estimate the strength of a country's economy. It can be considered as the magnitude of the economy as it represents the total worth of all commodities and services produced over a specific time span. It is expressed in dollars and the time period is usually taken as a calendar year. It is also known as Gross Domestic Income (GDI).
Since GDP is a relative amount so it is mostly given in relation to the amount produced during the last year or quarter. For instance, if the year-to-year GDP shows an increase by 2.7%, we can conveniently say that the economy of the country has gone up by 2.7% from the last year.
Gross Domestic Product is a difficult value to calculate. Economists are specially qualified to compute it. However we can basically do the measurement in two ways. In the first method, GDP can be calculated by summing up all the earnings of everybody in the country which they have earned in one year. It is commonly known as the income approach. The second method is called the expenditure method and in this way GDP can be calculated by summing up all the expenditures which everyone in the country has done over one year. If correctly calculated, both methods should present almost the same figure.
It can be easily imaginable that GDP has an enormous effect on the daily lives of each citizen of the country. As an example we can say that when the economy is strong, there will be more employment and labour will be getting more wages. A noteworthy upward or downward variation in GDP commonly has a major effect on the stock market as well.
Some limitations and drawbacks of GDP include the ignorance of voluntary work in it. GDP also does not take into account the disproportion in incomes of deprived and wealthy people living in same society.
