GDP (Gross Domestic Product)

Gross Domestic Product (GDP) measures the economic growth of a country. It represents the monetary value of all goods and services produced by economic agents within a country over a given period.

How is GDP calculated?  

GDP is calculated by adding up the value added of everything produced in the country, namely:  

• The value added of market productions, that is to say those produced by private companies. They are equal to the turnover (price of products multiplied by the quantity sold) minus intermediate consumption (goods and services destroyed or transformed during the manufacturing process).  
• The value added of non-market productions, that is to say those produced by administrations (e.g., 1 hour of teaching provided by a teacher).

Nominal GDP and Real GDP

The measurement of GDP growth can be done in nominal terms (without taking inflation into account) or in real terms (after accounting for price changes).

GDP is an aggregate measure that imperfectly reflects the disparities in actual wealth levels between countries. Therefore, it is generally preferable to relate GDP growth to the resident population: this is GDP per capita.

GDP per capita

If we want to compare wealth levels between countries, we need to convert GDP into a single currency: the PPP dollar (purchasing power parity).  
This allows us to eliminate differences in price levels between countries.  
It is also necessary to calculate GDP per capita to compare the wealth potential of each inhabitant.