Despite the fact that the GDP indicator seems to people far from the economy, something beyond understanding, in fact, the calculation of GDP is quite simple. Of course, one cannot say that this indicator is devoid of flaws, because it does not take into account many subjective factors of economic development, such as specialization of production, high technology, etc. However, GDP, being an indicator calculated according to strict mathematical rules, can be calculated quite accurately, despite the enormous scale of the national economy. Comparison of the development of different economies can also be done fairly accurately. It is enough to compare the per capita GDP in dollar terms. Moreover, all methods of calculating GDP give the same result, which is very convenient for using this indicators in analytical calculations.
There are currently three methods for determining GDP. The first method, the classical one, is a simple addition of the added values created in the economy over a certain period. It should be noted that the calculation of GDP does not take into account the cost of raw materials used in the production process. Otherwise, we would consider their value several times - the first time as a finished product, the second time as an integral part of the cost of the goods of course. Thus, GDP can be calculated by adding the economic result of the work of each economic entity. That is, the calculation takes into account only the value that the company added, and not the total cost of the product.
If this method seems a bit confusing to you, then maybe you should pay attention to other methods of calculating GDP. The so-called expense method today is most often used by specialists in the field of macroeconomics. According to this method, the country's entire GDP is divided into four main components: household spending, i.e. ordinary consumers, company expenses, namely investment, government spending and the relationship of the national economy with abroad.
In fact, a rather simple scheme is obtained. Everything that is not spent by households is invested by enterprises, according to Keynes's macroeconomic law. We add here another state that collects taxes to the budget and at the same time carries out public procurement, forming additional demand. In an open economy, additional demand is also formed abroad, if export exceeds import, in the opposite situation, demand, and hence GDP, on the contrary, decreases. Because of its simplicity and clarity, this equation is used not only to calculate GDP, but also in other more complex studies.
And finally, the methods of calculating GDP closes the income method. In this rather rarely used method, there is logic similar to the expenditure method. All GDP is divided between economic entities that provide factors of production, only in this case it is not their expenses that are considered, but income. Since expenses are equal to incomes, the result will be the same. Thus, in this case, it is necessary to add wages (income of individuals), profit (income of companies), interest (income from the provision of capital) and rent (income from the provision of land).
As you can see, the methods for calculating GDP and their logic are not complicated. GDP is all that the economy has produced through the joint efforts of all economic entities. At the same time, GDP does not include income from speculative financial transactions, since they do not increase real production. In addition, the sale of second-hand goods and donations of material values are not included in GDP. All these operations are just indicators of the redistribution of previously recorded benefits. GDP, however, claims to reflect the real development of the national economy and today is the most suitable indicator for this, albeit far from perfect.