What is GDP?
GDP (Gross Domestic Product) is the value of all final goods and services produced in a country over a period, usually a quarter or a year. It is used to measure the size of an economy.
What it counts
Final products and services are counted, such as a car sold, a restaurant meal or a medical appointment. Intermediate products (like the steel used to build the car) are not counted, to avoid counting the same thing twice.
How it is calculated
A common way is to add up spending in the economy:
GDP = consumption + investment + government spending + (exports − imports)
Growth and recession
- Growth: GDP in this period compared with the previous one. If it grows 2%, the economy produces 2% more. People usually look at real GDP, which removes inflation.
- Recession: commonly, a recession means GDP falling for two quarters in a row.
GDP per capita
This is GDP divided by the number of inhabitants. It gives an idea of average wealth per person and helps compare countries of different sizes.
Its limits
GDP does not tell the whole story. It does not measure how wealth is shared among people, nor well-being, nor unpaid household or care work, nor environmental impact. That is why it is used alongside other data, such as unemployment, inflation or wages.
Why it matters
When GDP grows, there is usually more employment and more public revenue. When it falls, unemployment tends to rise. That is why its figures appear so often in economic news.
GDP measures how much a country produces. If it grows, the economy is expanding; if it falls for several quarters, there is a recession. It is useful, but it does not explain everything.
Informational and educational content. Not financial advice.