GDP

In 20th century theories of economics, the gross domestic product (GDP) was used as a measure of the size of the economy of a particular territory. However, it always had serious problems as a metric, suffering in particular from the broken window fallacy (valuing activitie which make up for harms and those that create new goods equally). It also seems to overvalue infrastructural capital. It is thus the most controversial indicator in economics:

Its creators never advised it as a useful indicator in managing money supply, and have deplored its use and reporting in that fashion. It is nonetheless ab/used that way by almost all countries in the planet Earth. See uneconomic growth, net domestic product, measuring well-being, ecological yield and nature's services for modern views.

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 countries

(List of the total GDP, PPP basis by country)

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

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

List of the biggest economies

(based on total GDP, PPP basis)

1. European Union 10.84 trillion
2. United States 10.40 trillion
3. China (mainland) 5.70 trillion
4. Japan 3.55 trillion
5. India 2.66 trillion
6. Russia 1.35 trillion
7. Brazil 1.34 trillion
8. South Korea 931 billion
9. Canada 923 billion
10. Mexico 900 billion

(1) Although the European Union is not formally a nation, it is tied together with a single currency (excluding the UK, Sweden and Denmark) and is considered by some to be a single entity.

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