What is Gross Domestic Product?
What is Gross Domestic Product or GDP is a fundamental question for macroeconomics students.
Gross Domestic Product or GDP is the the usual measure for production in an economy.
GDP is a measurement for the production of goods and services at the final market price to consumers in a given time period.
Simply GDP is the measure of all the country’s output in a given time period.
Remember, output is the goods and services produced by the economy.
People often think of products as only physical goods. However services such as a restaurant meal, buying insurance or transport are important products in an economy.
The GDP statistic captures only the final sale to the consumer.
Items not included in GDP are;
- The individual intermediate sales as value is added from growers, to producers, to wholesaler to retailer,
- Voluntary work or ‘not for cash’ sales (the black economy), and
- Expenditure made on overseas products (imports).
Economists make comparisons about the living standards of countries based on their GDP.
The growth (or decline) in GDP is an important indicator for measuring economic growth or recession.
GDP per Capita is a better method of comparing countries on GDP data to take account of the size of an economy.
To learn more about this, as a starting point, take this Introductory Macroeconomics Tutorial Course Aggregate Demand and Supply Tutorial Course