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Gross Domestic Product

What Is It?

Gross Domestic Product (GDP) is the total value of the goods and services that are produced within a country's borders by citizens and non-citizens in a fiscal year.

How Is It Calculated?

Gross Domestic Product (GDP) is calculated using one of three methods:

  1. Production Method: The sum of all value added to each stage of production of all goods and services.
  2. Income Method: The sum of all wages, profits, interest, and rents.
  3. Expenditure Method: The sum of the purchase values of all goods and services.

There will be slight variances when comparing these three methods, but they produce fundamentally the same result.

As a point of reference, Gross National Product (GNP) is the total value of goods and services that are produced by the citizens of a country both domestically and abroad.

What Does It Mean?

GDP is a broad measure of a country’s overall domestic production and so gives an overview of a country’s economic health. It is among the more important indicators that policymakers, investors, and businesses use in strategic decision-making.

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