GDP (Gross Domestic Product)

Gross Domestic Product (GDP) is the most widely used measure of a nation's economic output and overall economic health. It calculates the total market value of all final goods and services produced within a country during a quarter or year, using one of three approaches: expenditure (C + I + G + NX), income, or production. GDP is reported by government agencies (the Bureau of Economic Analysis in the U.S.) and is typically expressed in both nominal terms (current prices) and real terms (adjusted for inflation). Real GDP growth is the primary indicator of economic expansion or contraction — two consecutive quarters of negative real GDP growth is the common shorthand for a recession, though the official designation involves a broader assessment. GDP per capita (GDP divided by population) is used to compare living standards across countries. While GDP is indispensable for economic analysis, it has limitations: it excludes unpaid work, the underground economy, environmental degradation, and wealth distribution. Investors closely watch GDP reports because they influence Federal Reserve policy, corporate earnings expectations, and market sentiment.