How a GDP is calculated for a country?
Answer:
GDP is a measure of Nationa Income generated within the country. But at National level, total of income and total of expenditure is the same. Whatever is earned is spent either for consumption or saved and therefore invested. But income is generated by adding value in the process of production og goods and services. Thus there are basically three methods of computing GDP. First take all production of goods and services activity and find out the value added by each such activity (value added is equal to the difference between the value of goods and services produced/ sold and the cost of all inputs that goes into producing the goods and services, except the payments to the factors of production in the form of wages/salaries, rent for land, interest on capital/ borrowings and profits. The second method is to take all final goods of consumption and actual investment expenditure (expenditure method). Third is to aggregate incomes of all people from domestic sources.
Since it is difficult to be accurate because so many people/ so many items goods and services and so many enterprises, businesses and farmers, all the methods are tried out to come to a realistic measure.
The above is a broad idea of how GDP is computed. There are many technicalities and many estimation issues which is better studied separately in detail.
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