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Gross domestic product

The gross domestic product (GDP) is a measure used in economics of the size of a territory's economy.

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 countries by total GDP, PPP basis

Rank Country PPP total PPP/capita Population
  (U.S dollars) (U.S dollars) (2003 est.)
1. United States of America 10.40 trillion 37,600 290,343,000
2. China (P.R.) 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

Source: CIA World Factbook: PPP, PPP/Capita, Population 

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: GDP deflator, Measures of national income, Natural gross domestic product