# GDP – Gross Domestic Product

Definition

GDP is the money value of all the activities performed in a country during a single year. These activities can be divided into two areas:

• Production of goods
• Provision of services.

## The Difference Between Total Sales and Added Value

The added value is the amount that a country produces or creates by itself, out of its total sales.

## Added Value of the Firm

A firm is a company that conducts some type of economic activity. The added value of a firm is the monetary value of its sales, minus the value of the materials it buys from local companies or companies in other countries.

Example 1

The added value of Furniture Ltd. is calculated as follows:

Total sales: \$100,000

Local purchases: (\$15,000)

Foreign purchases: (\$30,000)

Total purchases: (\$45,000)

Added value (sales minus purchases): \$55,000

Example 2

Calculation of GDP for a country without economic links to other nations.

Assume that Country A has two factories:

1. A flourmill