What Is Gross Domestic Product (GDP)?

Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on March 29, 2023

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 (GDP) FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, or check out his speaker profile on the CFA Institute website.

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