What Factors Affect Current Dollar GDP?

The only major factor affecting the current dollar gross domestic product (GDP) is the level of economic activity over a certain time frame, typically one year. Unlike the real dollar GDP, which takes into account inflationary influences, the current dollar GDP does not. Therefore, many may not consider it to be the most effective or accurate measure of the GDP. While only one major factor makes up the current dollar GDP, this can be broken up into several different areas, as indicated by the formula used to measure the GDP.

The formula for the current dollar GDP is relatively straightforward. 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 percent 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 to determine current dollar GDP is consumption. This includes all private spending on goods and services. Consumption is something done by businesses, as well as private individuals. In some cases, the item may have valued added to it and be sold again, but many products may be sold only once.

The next part of the formula deals with investment. The investment generally comes from domestic sources, and is not simply money people take out of circulation. Rather, investment is money put into savings accounts and other investment vehicles that is then used by borrowers, often industry, to further 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 of money that governments spend on any number of things, such as 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. Thus, this can make up 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 a negative number, and actually take away from the current dollar GDP. For countries that are net exporters, this will only help to increase the GDP number.