'Gross Domestic Production' defined

Gross Domestic Production

Gross domestic production is defined as " The monetary value of all final goods and services produced within an economy during a given period of time"

Explaination

The definition might simple as it seems but there are some important key concepts that needs to be taken care of. we will look into these concepts below

Monetary value

While gross domestic production is all about production of goods and services we normally represent it in monetary figures. Why don't we use the actual units in which it was produced. for example we could say 24,500 billion tons of wheat produced in 2014 rather than mentioning it in monetary units say rupees.

The reason is goods and services are not homogeneous. Their unit varies from good to good, wheat might be measured in tons but production of Oil is in barrels. Haircuts are measured as number of people. lectures as credit hours. Again goods and services are of numerous varieties and it is cumbersome to compose a single list for them. It is due to such reasons that a common unit is required and thus all goods are measured in rupees or internationally in dollars.

Final Goods and Services

It is important to use only those goods and services which would be consumed and not used as an input in the production of other goods and services. If such care is not taken we will end up in double and triple counting.

Suppose we want to calculate GDP in Pakistan and have the following data of three products Tree, Planks, Chairs. Summing the monetary value of these products will give us a GDP of Rs.3700.

Producer	Product	Value of good in Rupees
Farmer	Tree	1000
Wood cutter	Planks	1200
Carpenter	Chairs	1500
Sum		3700

But have we calculated it all correct. Simply not, because only chairs are the final goods and the rest are intermediate goods. Farmer produces trees on his land sell it to wood cutters who makes it into planks and sell those planks to carpenter who ultimately produce chairs out of it. it is the same tree that we have counted three times in our GDP. In this case our actual GDP is Rs.1500 only.

Within an Economy 

Gross Domestic production refers to Domestic Production only. So we will count whatever is produced within the boundaries of an economy no matter whosoever produces it. If an Afghani worker produces anything within the boundary of Pakistan it would be included in Pakistan's GDP and if a Pakistani worker send remittances from Gulf countries it would not be included in GDP.

However, Remittances from gulf countries will be included in our Gross National Production (GNP) which includes production by nationals rather than restricted by boundaries. The distinction between GNP and GDP will be discussed later in detail

During a given Period of Time

GDP is a Flow variable and it must be measured as 'per unit of time'. GDP is mostly reported on per year basis in Pakistan. In developed countries they are available on quaterly and semi-annual basis as well.