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.

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, 2002

United States: 10,400 billion dollars
China: 5700 billion dollars
Japan: 3550 billion dollars
India: 2660 billion dollars
Germany: 2184 billion dollars
France: 1540 billion dollars
United Kingdom: 1520 billion dollars
Italy: 1438 billion dollars
Russia: 1350 billion dollars
Brazil: 1340 billion dollars

(estimates from CIA World Factbook}

The methodology for deriving accurate PPP comparisons remains under constant review, and questions have been raised as to whether the relative size of China's GDP may be overstated to some extent.