Importance of Gdp;Why is GDP important to a country?

Importance of Gdp.GDP growth is crucial for an economy, as an increase in GDP reflects an increase in economic activity. If economic activity picks up, it means that unemployment tends to fall and income per capita increases. This in turn results in economic growth, since economic agents will be more inclined to spend rather than save. In addition, after an increase in GDP, the state’s tax revenue tends to rise, since it collects more taxes and, therefore, the state can allocate these amounts to spending.

 Why Importance of Gdp

Gross Domestic Product (GDP) is used to measure the economic activity of a given location, not necessarily just a country.This means that when GDP grows, it is a sign that Brazil’s economy is going from strength to strength, whereas when it falls, it is a sign that corporate income is lower and, as a result, we will have fewer jobs and wages Fall.

In other words, GDP is important to understand economic growth and also to compare how one country, state, municipality or region is in relation to the other. In addition, the analysis of GDP also makes it possible to identify which sectors are driving the economy and which are points of attention.

Another term that is related to GDP is the trade balance. Understand what it is, how it is calculated and what it is for.

What is GDP per capita?

The calculation of GDP per capita (or GDP per person) shows how much each individual would have of the Gross Domestic Product if the wealth were distributed equally, which serves to indicate a parameter of the local standard of living.However, this is only a theoretical aspect, as it does not take into account the discrepancies in the distribution of income.

How is GDP calculated?/Importance of Gdp;

Now that you know what GDP means, it’s good to understand how it is calculated. Who does the calculation of the GDP is the Brazilian Institute of Geography and Statistics (IBGE). The agency collects the data, structures it in research and disseminates it to the press.

In practice, IBGE adds up all the goods and services produced in Brazil during a certain period, which is normally a year. And when we talk about everyone, they are all, from the brigadeiro and the bread they sell at the bakery on the corner of your house to the luxury cars sold by the big companies.

In addition, the products that are considered in the calculation of GDP have as reference the value that arrives for the consumer, which means that taxes on goods and services are also embedded in the account.

What is the difference between GDP and GNP?

You already know what GDP is, but it is also important to understand what GNP means.

PNB is the acronym for Gross National Product and corresponds to the value of all goods and products produced in a country over a year in the national territory or not.

Thus, GNP is the sum of GDP and RLEE (Net Income Sent Abroad), which is the difference between how much was sent abroad and how much was received from foreign production. So, we can say that GNP = GDP + RLEE.

What hinders GDP growth?

There are some factors that must be taken into account and that harm a country’s gross domestic product.


  • Infrastructure and poor product transport;
  • Political and economic changes that make companies suspicious and invest less in the country;
  • Bureaucracies;
  • Inflation;
  • High interest;
  • Lack of qualified labor due to low schooling;
  • High and complex tax burden.

Conclusion;Importance of Gdp

GDP is an excellent indicator for understanding how the sectors of the economy are performing. Even though it does not take into account important aspects to consider in a country, the Gross Domestic Product is a fundamental data to analyze sectors of the economy (especially those with high performance) and how much was produced by each one.And its biggest advantage is in allowing the comparison of the value of a year with the results of previous years to understand whether the economy has grown or not.

by Abdullah Sam
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