GDP is also regarded as sum of value that is added at each and every stage of production. It is also known as aggregate value of every finished good and services that are produced within a certain period of time in a particular state. It is normally expressed in terms of money. Over years, gross domestic product has been an important indicator of economic welfare of any particular country.
There are several ways of measuring gross domestic product of a country. However, most commonly followed method involves adding several factors like consumption, governmental expenditure, gross investment and difference of exports and imports, to obtain GDP figure.
GDP is different from GNP or gross national product as in gross national product includes net foreign income in its calculations, instead of net imports or exports. GDP is more regional or geographic compared to GNP while GNP focuses on nations.
There are several factors that are important in context of gross domestic product of a particular country. The formula used for calculating GDP is as follows:
C stands for consumption done at private levels in that particular country whose GDP is being measured. I is investment made by various entities, for example- families and business establishments. G stands for expenditure made by governmental entities, X stands for exports and M stands for imports.