Gross Domestic Product

Gross Domestic Product

The value of all final goods and services produced by a country in a year.

Measures aggregate output

GDP measures the total output of a country's economy.

Counts the dollar value

GDP is measured in monetary terms.

Only FINAL goods and services

GDP only includes the value of goods and services that are consumed by the end user.

Produced 'at home'

GDP includes goods and services produced within a country's borders, regardless of the company's origin.

Useful for making comparisons

GDP can be used to compare economic performance over time or between countries.

What is not GDP?

GDP does not include used goods, financial transactions, goods produced outside a country's borders, non-market transactions, underground markets, or intermediate goods.

GDP: Production Approach

Calculating GDP by adding up the value of all final goods produced in the economy.

GDP: Expenditure Approach

Calculating GDP by adding all of the money spent on final goods and services.

GDP: Income Approach

Calculating GDP by adding up all the income received by firms from selling goods and services.

Wages

Money earned by firms that is paid to workers as wages.

Interest

Money earned by firms that is paid to people who lent them money.

Rent

Money paid to rent land used for production.

Profit

The remaining income after wages, interest, and rent have been paid.

Nominal GDP

The current dollar value for one year's GDP.

Real GDP

GDP corrected for inflation.

Real GDP per capita

Real GDP divided by the population of a country, used to track the health and growth of an economy.

Increasing capital leads to more growth

Increasing the amount of capital in an economy leads to more economic growth.

Industrialized nations tend to have higher GDP per capita

Countries with more industrial development tend to have higher GDP per person compared to non-industrialized nations.