Previously the GDP of a country is calculated by the amount of gold bullion that this country had under its domain. Thus, calculating his GDP was a fairly straightforward process. It was only necessary to know the amount of gold and the price that was being handled in the market at that time. However, this was changing over time.
Currently, calculating GDP for both a nation has become a process that encompasses a global economic system. Well, it has involved different factors that make up the economy of a country.
Completely scrapping the gold bullion system. That is why we can find countries with a very high GDP that do not even have natural resources. In this article we will explain how the productivity of a country influences its GDP.
What is the GDP of a country?
The Gross Domestic Product or GDP refers to the set of final goods and services that a country comprises, expressed in the US dollar currency. One way to understand it is by referring to the total amount of income that a country receives for each of the different concepts that make it up. This can be per capita income, it can also be divided by sectors of the economy.
When it is said that the GDP of a country increases, it means that the entire country is generating more income. It can also be said that the economy of that country is improving.
On the contrary, when it is said that the GDP of the country decreases, it means that the country enters an economic recession or that its economy decreases. This has the consequence that people lose purchasing power because their income decreases.
Influence of productivity on GDP
As we mentioned before, GDP can be defined as the total income of a group. Now, productivity plays a very important role in this income. For while a country is more productive in terms of final goods and services, the GDP of this country will increase in proportion to this productivity.
Currently, this increase in GDP linked to increased productivity can be seen in many African countries. That they have increased their production of goods and services, which has contributed positively to their economic growth.
On the other hand, the decrease in productivity in a country increases unemployment and decreases per capita income. Such is the case of the Venezuelan economy, which for a few years has been suffering the biggest economic recession in the world. Therefore, its GDP shows a decrease and the consequences of this are experienced by its inhabitants.
This does not mean that a productive country is synonymous with a high GDP. Well, another variable that we must also take into account, which is much more difficult to control, is the demand within the market economy.
How is the GDP of a country calculated?
Although GDP represents the same thing in any case, it is possible to calculate it in three ways:
The first is through income, this is basically what was discussed at the beginning. The amount of money earned in a country is the sum of the money of each of the people who generate income. This amount includes salaries, bonuses, bonuses, among others. Of course, both public workers, private workers and independent workers are considered.
Second, we can calculate GDP using value added. This is equivalent to the final cost of goods and services. Well, if we are talking about a French fry restaurant, we must include the final cost of the French fries and not the cost of the potatoes when they are harvested. The same applies to all sectors of the economy of a country such as machinery, automotive, oil, among others.
Lastly, GDP can be calculated using rents. This is the opposite of the previous case, since it is the sum of money that is spent on all goods and services. In addition, to this we must subtract the value of imports, which of course does not correspond to the domestic product.
