GDP measures the monetary value of all the finished goods and services produced within a country during a given period, typically one year. It is calculated and published by national statistical agencies, which collect and compile data from a variety of sources. In the United States, this is done by the Bureau of Economic Analysis (BEA).
There are 3 main ways to calculate GDP: production, consumption and trade. Production includes all the output of a country’s economy, such as goods and services produced for sale, private consumption, business investment and government spending. It excludes intermediate goods used in production, such as raw materials and equipment. Consumption includes all the purchases of goods and services by citizens, businesses and organizations. This includes things like retail purchases, health care, food, and housing. Investment includes purchases of durable goods, such as computers and cars, and non-durable goods, such as education and training. It also includes capital expenditures, or investments in fixed assets, such as machinery and buildings. Trade is the sum of exports minus imports.
GDP is a broad measure of economic activity that can be used to compare the level of economic development in different countries. However, it has limitations as a tool for assessing the quality of life in a nation. For example, it does not take into account the cost of environmental degradation or the quality of education. It also does not take into account the unpaid work performed by family members and volunteers.
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