Current dollar GDP is determined by the value of consumption, investment, government spending, and trade surplus or deficit. It is not adjusted for inflation and may not be the most accurate measure of GDP.
The only major factor that affects the current dollar gross domestic product (GDP) is the level of economic activity over a given period of time, typically a year. Unlike real GDP in dollars, which takes into account inflationary influences, current GDP in dollars does not. Therefore, many may not consider it the most effective or accurate measure of GDP. While only one major factor makes up for current dollar GDP, it can be broken down into a number of different areas as indicated by the formula used to measure GDP.
The formula for current dollar GDP is relatively simple. Economists take the value of consumption plus investment plus government spending and then add the value of the trade surplus or deficit to that number, usually written as exports minus imports. While it may be impossible to measure all of these areas with 100% accuracy, as long as the methods remain the same or very similar over the years, it should be easy to spot trends.
One of the most important factors in the formula for determining the dollar’s current GDP is consumption. This includes all private spending on goods and services. Consumption is something done by companies as well as individuals. In some cases, the item may have been added to it and sold again, but many products may only be sold once.
The next part of the formula deals with investment. Investment usually comes from domestic sources and is not simply money that people take out of circulation. Rather, investment is money invested in savings accounts and other investment vehicles that are then used by borrowers, usually in industry, to make a profit and possibly increase the amount of goods and services available to the consumer.
Current dollar GDP also includes government spending. This is the amount that governments spend on countless things like infrastructure improvements and other services. While many think of the federal government as the only spender in this category, it also includes state or regional governments as well as local governments. So this can be a significant factor in overall spending.
The last factor is the trade factor, expressed as exports minus imports. For some countries, known as net importers, this number will be negative and actually takes current GDP off the dollar. For net exporting countries, this will only help increase the GDP number.
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