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Knowledge Base

The Composition of Gross Domestic Product

What is Gross Domestic Product?

GDP is a market value of all final goods and services newly produced in a country during some time. Market value means the total amount that people spend or produce measured by the market prices.

What does market value mean?

Market value is a total amount people spend or produce measured by market prices.

What is the difference between intermediate goods and final goods?

Intermediate goods are used to produce final goods.

How do you calculate GDP?

You calculate GDP by adding consumption, investments, government purchases, and net exports.

Consumption + Investments + Government Purchases + Net Exports = Gross Domestic Product.

What is the difference between consumption and investments?

Consumption is the amount people and households are spending on consumption goods, while investments in the amount business are spending. Investments are a form of saving, usually done by businesses.

What are net exports?

Net exports are the difference between exports and imports. When exports are larger than imports, net exports is positive. When a country imports more than it exports, like the United States currently does, then net exports is negative.