Definition
GDP is the broadest measure of economic activity and the most important macroeconomic indicator. It is measured three ways: expenditure (consumption + investment + government + net exports), income (wages + profits + rents + interest), and production (value added across industries). Real GDP adjusts for inflation; nominal GDP does not. GDP growth rate indicates economic expansion or contraction.
functions Formula
GDP = C + I + G + (X − M)
lightbulb Example
U.S. GDP is approximately $28 trillion. In a typical quarter, 70% comes from consumer spending, 18% from investment, 17% from government, and -5% from net exports (trade deficit).
verified_user Key Points
- Broadest measure of economic output
- Real GDP adjusts for inflation
- Two consecutive negative quarters = technical recession
- GDP growth drives corporate earnings and stock markets