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What Factors Affect GDP Ranking?

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  • Written By: Alex Paul
  • Edited By: Angela B.
  • Last Modified Date: 08 March 2014
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There are a number of factors that can affect gross domestic product (GDP) ranking, depending on the calculation method. Factors such as the value of all goods and services, the value of products purchased in an economy and the amount of income generated are all important for various GDP measures. The exchange rate of an economy’s currency also has an effect on GDP ranking in comparison to other countries.

GDP is one of the most important statistics in economics, because it provides a way of classifying the economic state of a country with a single number. Once it’s calculated, the GDP is an indication of whether an economy is growing or shrinking. A positive GDP indicates the economy of a country is growing, while a negative number shows the economy is shrinking. GDP ranking also can provide a direct comparison among economies around the world.

There are a number of factors that can affect the GDP ranking of a country, and there are several different ways of calculating the GDP. The various methods should all come to the same answer although, in reality, there may be some differences. For this reason, the GDP may be calculated using a combination of different methods.

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In the expenditure measure, which is one of the most common methods, the value of the services and goods purchased in a country are added up. The quantity of goods exported in comparison to those imported also is taken into account. In contrast, the income measure looks at the level of wages and profit rather than the amount purchased.

Another GDP ranking method is the output measure, which uses a slightly different set of factors to calculate the GDP. Instead of measuring the quantity of products and services bought by consumers, this method calculates the value of all goods manufactured and services provided by all parts of the economy. The output measure is considered to be the most accurate method of calculating GDP.

To formulate a table showing the GDP ranking of different countries, several other factors are important. The exchange rate, which is determined by the international currency market, needs to be taken into account when comparing the economies of two or more countries. The purchasing power of a country's currency, which is usually related to the US Dollar, also is required to accurately compare the GDP of different countries.

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