Gross Domestic Product (GDP) refers to the final results of productive activities of all resident units of a country (or region) during a certain period of time at market prices, and is often recognized as the best indicator of a country's economic situation.
Gross Domestic Product GDP is an important comprehensive statistical indicator in the accounting system, and is also the core indicator in China's new national economic accounting system, which reflects a country's (or region's) economic strength and market size.
GDP is not suitable for measuring the economic situation of a region or a city, because the amount of GDP handed over to the superior or the state is different in each city, so the wealth left behind in each city is not the same.
There are three methods of GDP accounting, namely, the production method, the income method, and the expenditure method, which reflect the results of the national economy's productive activities from different perspectives, and theoretically have the same accounting results in all three methods.
The production method is a method of measuring the new value created by resident units in the accounting period from the perspective of production, i.e., from the value of the total products produced by each sector of the national economy in the accounting period, the value of the intermediate products invested in the production process is deducted to obtain the value added.
The accounting formula is: value added = total output - intermediate inputs.
The income method is a method of accounting that reflects the final results from the perspective of income generation from the production process, based on the share of income due to the factors of production in the production process. According to this method of accounting, value added is obtained by adding four components: labor compensation, net production tax, depreciation of fixed assets and operating surplus.
The expenditure method measures the final destination of products and services during the accounting period from the point of view of end-use, and consists of three components: final consumption expenditure, gross capital formation, and net exports of goods and services.
Expanded Information: The GDP index is the most important index in the world. p>Significance of the GDP Index (a) Gross Domestic Product GDP is an important and comprehensive statistical indicator in the accounting system, and is also the core indicator in China's new national economic accounting system. It reflects the economic strength and market size of a country (or region). Whether a country or region's economy is in a growth or recession phase can be seen from changes in this figure. Generally speaking, GDP is published in two different forms, as a total and as a percentage rate. When the GDP growth figure is positive, it indicates that the region's economy is in an expansionary phase; on the other hand, if it is negative, it means that the region's economy has entered a period of recession. Gross Domestic Product (GDP) is the total amount of goods and services produced in a given period of time multiplied by the "price of money" or the "market price", i.e., the nominal GDP, which is equal to the ratio of the real GDP growth rate to the inflation rate. The rate of growth of nominal GDP is equal to the sum of the rate of growth of real GDP and the rate of inflation. Thus, even if total production does not increase, but only the price level rises, nominal GDP will still rise. In the case of price increases, the rise in GDP is only an illusion, and it is the rate of change in real GDP that has a substantial impact. So when using GDP as an indicator, it is also necessary to adjust nominal GDP through the GDP deflator to accurately reflect the actual change in output. Thus, an increase in the GDP deflator in a quarter is sufficient to indicate inflation in that quarter. A large increase in the GDP deflator would have a negative impact on the economy and would be a precursor to a tightening of the money supply, a rise in interest rates, and consequently a rise in the foreign exchange rate. (ii) GDP is an indicator of the results of productive activities of resident units. A resident unit is an economic unit that has a center of economic interest within the economic territory of a country. Economic territory means the geographical territory controlled or owned by the government of a country, that is, on the basis of the geographical scope of the country, it should also include the country's embassies and consulates abroad, scientific research stations, aid agencies, etc., and accordingly deduct the above-mentioned foreign institutions in the country (international institutions are not permanent resident units of any country, but their employees are permanent residents of the country in which they are located). Center of economic interest means an establishment or individual that has a certain place of activity within the economic territory of a country, engages in a certain production and consumption activity, and continues to operate or reside therein for more than one year, and there can be only one center of economic interest for an establishment or individual. Generally, in the case of an institution (unit), irrespective of the country in which its assets and management are under the control of, as long as the above criteria are met, the institution has a center of economic interest in the country in which it is located. In the case of an individual, regardless of the country of which he or she is a national, if the above criteria are met, the resident has a center of economic interest in the host country. Because the concept of resident unit strictly defines the scope of economic entities in a country, it is important for determining the caliber of calculation of gross domestic product (GDP), clarifying the boundaries of accounting between domestic and foreign countries as well as the scope of various transaction volumes. Baidu Encyclopedia - Gross Domestic Product