Gross Domestic Product Definition

What is GDP?

A country’s Gross Domestic Product, or GDP, is the total monetary or market value of all the goods and services produced within that country’s borders during a specified period of time.

GDP is usually calculated annually, but it can be calculated per quarter as well.

The US government, for example, releases both a GDP estimate for each quarter as well as the entire year.

Because GDP provides a broad measurement of a country’s production, it is often thought of as being a scorecard for a country’s economic health.

Types of GDP

There are a few different types of GDP measurements:

  • Nominal GDP is the simplest representation of GDP. This is just the raw data before any adjustments.
  • GDP per Capita measures the GDP per person in a country. This metric approximates the level of prosperity in a country. A high GDP per capita generally correlates with a high standard of living.
  • Real GDP takes into account inflation to allow for more accurate comparisons of production over time.
  • GDP Growth Rate is the increase or decrease in GDP from quarter to quarter.

Balance of Trade & GDP

Balance of trade is a key element in the GDP formula.

When a country sells more domestic products to foreign nations than it buys, its GDP increases.

When it buys more products from foreign nations than it sells (called a trade deficit), GDP decreases.

Gross Domestic Product FAQs

GDP is an acronym for Gross Domestic Product.
A country’s Gross Domestic Product, or GDP, is the total monetary or market value of all the goods and services produced within that country’s borders during a specified period of time.
Because GDP provides a broad measurement of a country’s production, it is often thought of as being a scorecard for a country’s economic health.
There are a few different types of GDP measurements: • Nominal GDP • GDP per Capita • Real GDP • GDP Growth Rate