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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

This page is adapted from the Recyclopedia version under the clauses of GFDL