Gross domestic product (GDP) is a broad measure of a country’s economic activity based on the total cash value of all goods and services it produces in a specific period of time.
Tracked over multiple years, GDP can show whether a country’s economy is growing or shrinking. Rising GDP is a sign of good economic health; falling GDP indicates that a country is not working at full capacity or may be in an economic recession.
Dividing the total GDP by a country’s population shows how much economic activity is contributed by each individual citizen on average (“per capita”).
More about gross domestic product
There are two ways to measure GDP:
- Expenditure method—Adding up all the money spent in a country in a given period, including consumer spending, investment spending, government spending and net exports. This is the common method.
- Income method—Adding up the total income of everyone in a country, including salaries, business profits and taxes. Subsidies (government money or incentives to stimulate economic activity) are excluded from this calculation. The income method is sometimes referred to as GDP(I).