Courses : Intermediate Macroeconomics Lecturer : Frischa Adellia Semester : 4th Semester, 2022/2023 Sesion Gross Domestic Product (GDP) Gross Domestic Product (GDP) is the value of all final goods and services produced in a country in a certain period, usually one year. GDP is often used as a standard measure of a country's economic growth and can also be used to compare economic well-being between different countries. GDP is obtained by adding up the added value of all economic activities in a country, namely the selling value of all final goods and services produced in a period, after deducting the value of goods and services used as raw materials or production inputs by other sectors. GDP is often used as the main indicator of a country's economic growth because it can provide an overview of overall economic performance. However, there are some criticisms of using GDP as a measure of economic growth, such as not taking into account changes in product quality or economic activity that are not officially reported. Apart from GDP, there are several alternative methods for measuring economic growth, such as the Consumer Price Index (CPI), which measures the inflation rate and the Gini Coefficient, which measures economic inequality within a country. In addition, there are also indicators such as the Unemployment Rate and Gross Regional Domestic Product (GRDP) which can provide information on economic growth at the regional or local level. As an example, we can use Indonesia's GDP data for 2020. According to data released by the Central Bureau of Statistics (BPS), Indonesia's GDP for 2020 is IDR 14,750 trillion. The calculation of GDP in 2020 is based on the gross added value generated by various economic sectors, such as agriculture, industry, trade and services. The following is an example of calculating Indonesia's GDP in 2020: 1. Agricultural sector o The gross added value of the agricultural sector in 2020 is IDR 390.8 trillion. 2. industrial sector o The gross added value of the industrial sector in 2020 is IDR 4,183.6 trillion. 3. Trade, hotel and restaurant sector o The gross added value of the trade, hotel and restaurant sector in 2020 was IDR 1,808.3 trillion. 4. Services sector o The gross added value of the services sector in 2020 is IDR 6,718.6 trillion. By combining the gross added value of the four sectors above, Indonesia's GDP in 2020 can be calculated as follows: GDP = 390.8 trillion rupiahs + 4,183.6 trillion rupiahs + 1,808.3 trillion rupiahs + 6,718.6 trillion rupiahs = 14,750 trillion rupiahs. The following table shows examples of the GDP of several countries in 2021: Country GDP (in trillion USD) United States of America 22.67 China 17.61 Japan 4.87 German 4.62 India 3.18 French 2.81 great Britain 2.62 Italy 2.12 Canada 1.84 South Korea 1.73 Note: The above GDP values may differ from the latest data, this is only an example for illustration purposes. Following are some of the features and characteristics of the Gross Domestic Product (GDP): 1. Size of the Economy: GDP is used to measure the size of a country's economy. The larger the GDP of a country, the larger the size of the country's economy. 2. Production Size: GDP reflects the amount of production of goods and services in a country in a certain period. Therefore, the higher the GDP of a country, the greater the production of goods and services within that country. 3. Prosperity Measure: GDP is often considered as a measure of a country's economic wellbeing. This is because the higher the GDP of a country, the higher the level of welfare of its people. 4. Economic Development: GDP can be used as a measure of a country's economic development. The higher the GDP growth, the higher the country's level of economic development. 5. Investment Indicator: GDP can also be used as an investment indicator. The greater the growth of GDP, the greater the profit potential of investment in a country. 6. GDP Per Capita: GDP per capita is a measure of GDP per person in a country. This can be used to compare the level of welfare between one country and another. 7. Effect of Breadth of Trade: GDP can also be affected by the extent of a country's trade with other countries. The greater the trade of a country, the greater the contribution of trade to the country's GDP.