What Is GDP?

GDP is the measure of the market value of all final goods and services produced within a nation in one year. It is the “benchmark” of a nation’s economy, and its growth or contraction is widely followed by investors, analysts, and policymakers. “Real” or “chained” GDP estimates adjust for inflation, allowing comparisons of economic output over time. The BEA publishes these figures for the United States, as well as for metropolitan areas, states, countries and territories around the world.

What is excluded from GDP?

A number of activities are not included in the calculation of GDP, including some types of household production and bartering. Some work is also excluded that is not performed for market exchange (as measured by the gross domestic product) but for private or public consumption or investment. This includes activities like growing vegetables, brewing beer, or building houses for personal use. The buying and selling of corporate shares and bonds is also not counted as a part of GDP because it is viewed as a swapping of ownership claims rather than an investment in products.

The White House and Congress monitor GDP to gauge the health of the economy, and state and local governments rely on these numbers when planning spending and taxation. Businesses watch GDP trends to decide on investments and expansions. Central banks, such as the Federal Reserve, often use GDP data when setting monetary policies. If GDP is growing too quickly, they might raise interest rates to slow down the economy and ward off inflation.