Gross domestic product

It is defined as the total value of all goods and services produced within that territory during a specified period (most commonly, per year). GDP differs from gross national product in excluding inter-country income transfers, in effect attributing to a territory the product generated within it rather than the incomes received in it.

A common equation for GDP is:

GDP = consumption + investment + government expenditures + exports - imports

Aggregate expenditures are calculated in a similar way, although the aggregate expenditures formula does not account for unplanned investment (left over inventory at the end of the reporting cycle) and is more commonly used by economic theorists.

GDPs of different countries may be compared by converting their value in national currency according to either (a) exchange rates prevailing on international currency markets, or (b) the purchasing power parity (PPP) of each currency relative to a selected standard (usually the United States dollar).

The relative ranking of countries may differ dramatically between the two approaches, as using official exchange rates can routinely understate the relative effective domestic purchasing power of the average producer or consumer within a less-developed economy by 50-60% owing to the weakness of local currencies on world markets.

On the other hand, comparison based on official exchange rates can offer a better indication of a country's purchasing power on the international market for goods and services.

For more information see measures of national income.

List of the biggest economies by total GDP, PPP basis

Rank	Entity	PPP total	PPP/capita	Population
		(U.S dollars)	(U.S dollars)	(2003 est.)
1.	European Union	10.84 trillion	28,600	379,000,000
2.	United States of America	10.40 trillion	37,600	290,343,000
3.	China (P.R.)	5.70 trillion	4,400	1,287,000,000
4.	Japan	3.55 trillion	28,000	127,215,000
5.	India	2.66 trillion	2,540	1,049,701,000
6.	Germany	2.18 trillion	26,600	82,399,000
7.	France	1.54 trillion	25,700	60,181,000
8.	United Kingdom	1.52 trillion	25,300	60,095,000
9.	Italy	1.44 trillion	25,000	57,998,000
10.	Russia	1.35 trillion	9,300	144,526,000
11.	Brazil	1.34 trillion	7,600	182,032,000
12.	South Korea	931 billion	19,400	48,249,000
13.	Canada	923 billion	29,400	32,207,000
14.	Mexico	900 billion	9,000	104,908,000
15.	Spain	828 billion	20,700	40,218,000
16.	Indonesia	663 billion	3,100	234,894,000
17.	Australia	528 billion	27,000	19,732,000
18.	Turkey	468 billion	7,000	68,110,000
19.	Iran	456 billion	7,000	68,279,000
20.	Netherlands	434 billion	26,900	16,151,000
21.	South Africa	432 billion	10,000	42,769,000
22.	Thailand	429 billion	6,900	70,000,000
23.	Taiwan	406 billion	18,000	22,116,000
24 .	Argentina	391 billion	10,200	38,000,000
25.	Poland	368 billion	9,500	38,000,000

Source: CIA World Factbook: PPP, PPP/Capita, Population

The methodology for deriving accurate PPP comparisons remains under constant review, and questions have been raised as to whether the relative size of Mainland China's GDP may be overstated to some extent.

See also: GDP deflator, Measures of national income, Natural gross domestic product

Referenced By