Gross domestic product

Definition

Gross Domestic Product (GDP) measures the total monetary value of all finished goods and services produced within a country's borders in a specific time period. It is a key indicator of a country's economic health and performance.

5 Must Know Facts For Your Next Test

1. GDP can be calculated using three approaches: production (or output), income, and expenditure methods.
2. Real GDP accounts for inflation, providing a more accurate reflection of an economy's size and growth over time.
3. Nominal GDP measures a country's total economic output without adjusting for inflation.
4. GDP growth rate is used to compare the economic performance of different countries or regions over time.
5. A higher GDP typically indicates better economic health, which can impact interest rates and investment decisions.

Review Questions

• What are the three main approaches to calculating GDP?
• How does real GDP differ from nominal GDP?
• Why is the GDP growth rate significant in comparing economic performance?

Related terms

Inflation: A general increase in prices and fall in the purchasing value of money.

Interest Rates: The amount charged by lenders to borrowers, typically expressed as an annual percentage of the principal.

Investment: The allocation of resources, usually money, with the expectation of generating income or profit.