Questions and answers about the gross domestic product

1. What is meant by gross domestic product (GDP)?

A: Gross domestic product (GDP) is the total value of all goods (goods and services) produced within one year within the borders of an economy and used for final consumption.

2. What is meant by the net domestic product (NIP)?

If the depreciations are deducted from the gross domestic product, the result is the net domestic product (NIP).

3. What does GDP serve as a measure?

A: The rate of change of real GDP serves as a measure of the economic growth of the economies (per capita: Luxembourg $ 105,000, Central African Republic $ 677).

4. What determines nominal GDP?

A: Nominal GDP gives as calculation amount the sum of domestic value added at current market prices.

5. What is nominal GDP linked to?

A: As a result, the nominal gross domestic product is directly linked to the price index of the economy, which it calculates.

6. What is the disadvantage of nominal GDP?

A: Since coupling to the rate of inflation, objective measurement prevents e.g. + 4% inflation = + 4 increase in GDP

7. How is real GDP decoupled from price changes?

A: In order to obtain the real GDP, the nominal GDP is divided by the price index (base year in Germany 2005).

8. How is the real GDP calculated?

A: BIPreal = GDPnomial

                  price index

9. How is the GDP per capita calculated?

A: GDP per capita = GDP real


10. Give an example of high and low GDP per capita?

A: High: Qatar $ 12,529 per capita and low: Central African GDP $ 677 per capita.

11. What are the problems of GDP in terms of its informative value?

Illicit employment, unpaid activities, self-sufficiency are not recorded. Tax model and wage-dependent frontier workers distort the balance sheet.

12. Why does Ireland have such high GDP?

In Ireland, many international companies tax revenues from all over Europe due to low taxes.