The gross domestic product (GDP) is the market value of all final goods and services produced by a country in a given period. The statistic is a key indicator of economic health and is closely watched by economists, analysts, investors, and policymakers. The advance release of GDP figures is often enough to move markets, although the effect can be limited.
The calculation of GDP is complicated and has evolved over time to keep pace with measurements of industry activity and the introduction of new forms of intangible assets such as intellectual property. However, GDP remains the best available measure of the economy’s output.
There are a number of different ways to calculate GDP, with the most popular being the “production method,” which adds up all industry outputs using basic prices and then subtracts production taxes and subsidies and depreciation of fixed capital. Another commonly used metric is the purchasing power parity (PPP) GDP, which adjusts for differences in price levels between countries to allow for direct comparisons of living standards.
The broader measure of GDP is sometimes called per-capita GDP, which adjusts for population size. This allows for direct comparisons of living standards between countries, though it is not as useful for international comparisons as the real GDP figure. Other measures of national wealth exist, including the human development index and the ecological footprint. While nobody likes higher prices, some people do benefit from inflation, such as borrowers who find it less expensive to repay their debt and homeowners who see the value of their homes rise.