GDP (Gross Domestic Product)

GDP (Gross Domestic Product)

is the market value of all final goods

and services produced within a country’s

borders in a given period (usually a quarter or

a year)

Importance of GDP

• Measures economic performance

• Tool for Policy-Making

• Standard of Living Indicator- GDP per capita

• Business Planning and Investment

• International Comparisons

• Government Revenue and Debt

• Indicator of Economic Development

• Tracking Recessions and Recoveries

Measures economic performance

It is is the

primary indicator of a country’s economic health.

Higher GDP → economy is producing more → signals

growth while Higher GDP → economy is producing more

→ signals growth.

Tool for Policy-Making- Governments

use GDP trends

to design fiscal policy (spending, taxes). Central banks

use GDP growth and inflation data to set monetary

policy (interest rates, money supply) Ex: If GDP

growth slows, govt may increase spending to stimulate

demand

Standard of Living Indicator- GDP per capita (GDP ÷

population)

is used as a rough measure of average

income and living standards. Higher GDP per capita

often correlates with better access to healthcare,

education, and infrastructure

Business Planning and Investment

Businesses

analyze GDP growth rates to forecast demand for

goods and services. Investors look at GDP trends when

deciding where to invest (both domestically and

internationally). A growing GDP signals profitable

opportunities

International Comparisons

GDP allows comparison of

economic strength across countries. Ex: comparing GDP

(PPP) between the Philippines and neighboring ASEAN

countries shows relative purchasing power and market size.

Government Revenue and Debt

Higher GDP usually

means higher tax revenues for governments. Debt

sustainability is often measured as Debt-to-GDP ratio.

Ex: A country with high GDP can sustain higher levels of

borrowing.

Indicator of Economic Development

Sustained GDP growth over

time often means improvements in industrialization, employment,

and innovation.

Tracking Recessions and Recoveries

Economists define a

recession as two consecutive quarters of negative GDP growth. GDP

data helps identify economic downturns early and measure

recovery.

In summary

GDP is important because it serves as the scorecard

of a nation’s economy—used by governments, businesses, and

international institutions to measure performance, plan policies,

compare nations, and predict future growth