Gross Domestic Product (GDP)

GDP is the total market value of all final goods and services produced within a country in a given period. It's the headline measure of the size of an economy.

• Real GDP strips out inflation so you can compare years fairly.
• It can be measured three ways: output, income, and expenditure — all should agree.
• GDP ignores unpaid work, inequality, and environmental costs, so it's an incomplete measure of wellbeing.

When the news says an economy “grew 2.5% last quarter”, that figure is the change in real GDP. Economists watch it to date recessions (two straight quarters of falling real GDP is a common rule of thumb) and to compare living standards across countries by dividing GDP by population — GDP per capita.

GDP is the best single number we have for the size of an economy, but treat it as a thermometer, not a report card: it measures output, not happiness, fairness, or sustainability.