GDP Calculator

Calculate a country’s Gross Domestic Product (GDP) using either the Expenditure Approach or the Income Approach. For explanations of terms or input details, see the information section below the calculator.

Understanding Gross Domestic Product (GDP)

According to OECD standards, Gross Domestic Product (GDP) is a comprehensive measure of economic production. It represents the total market value of all final goods and services produced within a country’s borders over a specific period, typically quarterly or annually.

Economic Indicators

• Economic Growth: An annual GDP growth rate above 2% generally indicates a healthy and expanding economy.

• Recession: An economy is commonly considered to be in recession when GDP declines for two consecutive quarters.

Three Methods of Measuring GDP

In theory, all three approaches should produce the same GDP value.

1. Production Approach

This is the most widely used method globally. GDP is calculated by summing the Gross Value Added (GVA) across all economic sectors such as agriculture, manufacturing, and services.

Formula:
Gross Value Added = Gross Output − Intermediate Consumption

Limitation: Distinguishing between intermediate goods and final goods can be challenging in practice.

2. Expenditure Approach

This method measures GDP based on total spending within the economy.

Formula:
GDP = C + I + G + (X − M)

Where:

• C (Consumption): Household spending on goods and services, including food, housing, healthcare, and durable goods.

• I (Investment): Business investment in equipment and structures; excludes financial investments such as stocks.

• G (Government Spending): Public sector wages and defense expenditures; excludes transfer payments like pensions or social benefits.

• X − M (Net Exports): Exports minus imports.

3. Income Approach

GDP is calculated by summing all incomes earned from production, with additional adjustments.

Step 1 – Gross National Product (GNP):
GNP = Compensation of employees + Proprietors’ income + Rent + Corporate profits + Interest

Step 2 – GDP:
GDP = GNP + Indirect business taxes + Depreciation + Net income from foreigners

• Depreciation: Also called capital consumption allowance; reflects the cost of maintaining productive capacity.

• Net Income from Foreigners: The difference between income earned domestically by foreigners and income earned abroad by residents.

What GDP Does Not Include

GDP does not capture all productive activity. According to the IMF, the following are excluded:

• Unpaid work such as household labor, childcare, and volunteer activities.

• Underground or illegal economic activities that cannot be reliably measured.

Comparing Living Standards: Nominal GDP vs. PPP

When comparing economies across countries, Nominal GDP can be misleading due to differences in price levels and exchange rates.

👉 GDP per capita at Purchasing Power Parity (PPP) is widely regarded as a better indicator of living standards.

Why PPP?
PPP adjusts exchange rates so that an identical “basket of goods” costs the same across countries, providing a more accurate comparison of real purchasing power.