About Global GDP
Gross domestic product (or, equivalently, national income) measures the market value of all the goods and services produced within a country in a given period. It is the most widely used measure of economic activity and is essential for making comparisons between economies. However, GDP does not take into account certain phenomena that impact citizens’ well being, such as pollution from traffic jams. Alternative measures, such as the Human Development Index and the Gross National Happiness Index, attempt to address some of these shortcomings.
Growth in global GDP is expected to moderate this year as a result of weakening household savings incentives and elevated geopolitical concerns, according to the latest World Economic Outlook report. In addition, global commodity exporters face weakening external demand, and the COVID-19 pandemic is likely to curtail travel and reduce consumer spending in the short term.
Purchasing power parity (PPP) estimates the price of a basket of goods and services in different countries by comparing the prices that would be paid in each country’s currency, adjusted for differences in inflation. This allows direct comparisons between countries even when they use different currencies.
The components of GDP are C (consumption), I (investment), and X (exports). Adding up these figures gives the total amount of goods and services produced in a country in one accounting period. Unlike market GDP, which only includes final goods and services, PPP also counts intermediate goods and services that are resold or transformed in another way before becoming a final good or service (for example, buying auto parts and selling them to a car manufacturer counts as production but not as consumption). Similarly, it counts the cost of imports as an investment but not as a consumption expenditure.
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