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:
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)
|(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|
|7.||United Kingdom||1.52 trillion||25,300||60,095,000|
|11.||South Korea||931 billion||19,400||48,249,000|
|20.||South Africa||432 billion||10,000||42,769,000|
|22.||Taiwan (ROC)||406 billion||18,000||22,116,000|
|23 .||Argentina||391 billion||10,200||38,000,000|
List of the biggest economies
(based on total GDP, PPP basis)
- European Union 10.84 trillion
- United States 10.40 trillion
- China (mainland) 5.70 trillion
- Japan 3.55 trillion
- India 2.66 trillion
- Russia 1.35 trillion
- Brazil 1.34 trillion
- South Korea 931 billion
- Canada 923 billion
- Mexico 900 billion
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.