Gross Domestic Product: How much is produced where

The Gross Domestic Product (GDP) is a measure of the overall production in a country. It is the total market value of all goods and services produced in a country during a period of time, e.g. one year.

The GDP has to be distinguished from the Gross National Product (GNP). The GDP measures all production on the territory of a country. The GNP measures all production by companies owned by a country. For example, the production of Toyota (a Japanese company) in the U.S. contributes to the GDP of the U.S. but not to the U.S. GNP. It enters the Japanese GNP but not the Japanese GDP.

See the sizes of different economies around the world. These are some of the largest economies but they are all still relatively small compared to the U.S. economy.

Decomposing the GDP: who are the buyers of the goods and services?

Consumption: these are the purchases of households;

Investment: these are the purchases of companies;

Government spending: the purchases of the government;

Net exports: the purchases of our goods and services by foreigners – our purchases of foreign goods and services.

For the U.S. economy, consumption accounts for about 68 percent of GDP, investment: 20 percent, government spending: 15 percent, and net exports: minus 3 percent. Net exports have a minus sign as the U.S. runs a trade deficit.

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