{"id":78341,"date":"2017-01-26T07:00:00","date_gmt":"2017-01-26T07:00:00","guid":{"rendered":"http:\/\/mostafa.openonline.co.uk\/?guid=482cf89b14e8000d3e999deabfcb2b44"},"modified":"2017-07-26T10:48:17","modified_gmt":"2017-07-26T10:48:17","slug":"news-story-gross-domestic-product-gdp-what-it-means-and-why-it-matters","status":"publish","type":"post","link":"https:\/\/mostafa.openonline.co.uk\/?p=78341","title":{"rendered":"News story: Gross Domestic Product (GDP): What it means and why it matters"},"content":{"rendered":"

Updated:<\/em> Updated with ‘What is GDP?’ animation.<\/p>\n

\n

The animation below gives a quick introduction to GDP<\/abbr>
\n<\/h3>\n

What is GDP<\/abbr>?<\/a><\/p>\n

\nGDP<\/abbr> is the size of the economy at a point in time<\/h3>\n

GDP<\/abbr> measures the total value of all of the goods made, and services provided, during a specific period of time.<\/p>\n

Goods are things such as your new washing machine, or the milk that you buy. Services include the haircut from your hairdresser, or repairs done by your plumber.<\/p>\n

It\u2019s only final goods and services that are sold to you and me that matter for GDP<\/abbr> though. So if some tyres roll off a production line and are sold to a car manufacturer, the value of the tyres isn\u2019t included in GDP<\/abbr>, it is reflected in the value of the car.<\/p>\n

The amount you pay, or the market value of that good or service, is what\u2019s important as these are added together to get GDP<\/abbr>.<\/p>\n

Sometimes people use the phrase Real GDP<\/abbr>
\n<\/h3>\n

This is because GDP<\/abbr> can be expressed in nominal or real terms. Real GDP<\/abbr> takes the value of goods and services produced in the UK, but it takes into account changing prices to remove the effect of rising prices over time, otherwise known as inflation.<\/p>\n

Real GDP<\/abbr> is otherwise known as the \u2018constant price\u2019 measure of GDP<\/abbr>.<\/p>\n

Nominal GDP<\/abbr> still measures the value of all the goods and services produced in the UK, but at the time they are produced.<\/p>\n

It is otherwise known as the \u2018current price\u2019 measure of GDP<\/abbr>.<\/p>\n

There\u2019s more than one way of measuring GDP<\/abbr>
\n<\/h3>\n

Just imagine trying to add together the value of everything made in the UK \u2013 that\u2019s no easy feat, which is why there is more than one way of measuring GDP<\/abbr>.<\/p>\n

GDP<\/abbr> is calculated three ways, adding up:<\/p>\n

    \n
  • all the money spent on goods and services, minus the value of imports (money spent on goods and services produced outside the UK), plus exports (money spent on UK goods and services in other countries)<\/li>\n
  • the money earned through wages and profits<\/li>\n
  • the value of goods and services produced<\/li>\n<\/ul>\n

    These are known as the expenditure, income and output measures of GDP<\/abbr>, respectively. All three different methods of calculating GDP<\/abbr> should, in theory, give the same number.<\/p>\n

    In the UK, we get a new GDP<\/abbr> figure every 3 months<\/h3>\n

    So if the GDP<\/abbr> figure is higher than it was in the previous 3 months \u2013 the economy is growing.<\/p>\n

    If it\u2019s lower \u2013 the economy is getting smaller.<\/p>\n

    The Office for National Statistics (ONS<\/abbr>) is responsible for calculating the GDP<\/abbr> figure for the UK. Naturally it collects a lot of data from a lot of different sources to do this. It surveys tens of thousands of UK firms working in manufacturing, services, retail and construction, as well as using a wealth of administrative data.<\/p>\n

    You might have heard people refer to the first or second estimate of GDP<\/abbr>
    \n<\/h3>\n

    The ONS<\/abbr> calculates GDP<\/abbr> using each of the expenditure, income and output measures of GDP<\/abbr>. The first estimate is just the output measure, with expenditure and income measures added from the second estimate.<\/p>\n

    The UK is one of the fastest countries in the world to compile the first estimate, although to do this it doesn\u2019t have all the data it needs for a complete picture.<\/p>\n

    At this point, the ONS<\/abbr> has only gathered about 40% of the information it needs \u2013 so this can be revised at the second and third estimates, when they have gathered more information. GDP<\/abbr> can also be revised at a later date due to changes in the methods for estimating it, or to incorporate less frequent data.<\/p>\n

    \nGDP<\/abbr> matters because it shows how healthy the economy is<\/h3>\n

    Rising GDP<\/abbr> means the economy is growing, and the resources available to people in the country \u2013 goods and services, wages and profits \u2013 are increasing.<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

    Gross Domestic Product (GDP) measures if and how much the economy is growing. Here we explain what it actually is and how it\u2019s measured.<\/p>\n","protected":false},"author":8,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[13],"tags":[],"_links":{"self":[{"href":"https:\/\/mostafa.openonline.co.uk\/index.php?rest_route=\/wp\/v2\/posts\/78341"}],"collection":[{"href":"https:\/\/mostafa.openonline.co.uk\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mostafa.openonline.co.uk\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mostafa.openonline.co.uk\/index.php?rest_route=\/wp\/v2\/users\/8"}],"replies":[{"embeddable":true,"href":"https:\/\/mostafa.openonline.co.uk\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=78341"}],"version-history":[{"count":2,"href":"https:\/\/mostafa.openonline.co.uk\/index.php?rest_route=\/wp\/v2\/posts\/78341\/revisions"}],"predecessor-version":[{"id":82972,"href":"https:\/\/mostafa.openonline.co.uk\/index.php?rest_route=\/wp\/v2\/posts\/78341\/revisions\/82972"}],"wp:attachment":[{"href":"https:\/\/mostafa.openonline.co.uk\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=78341"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mostafa.openonline.co.uk\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=78341"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mostafa.openonline.co.uk\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=78341"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}