Gross Domestic Product (GDP)

GDP adds up everything an economy produces, from cars and houses to haircuts and software, counting only final products to avoid double counting. The flour sold to a baker is not counted separately; its value is included in the price of the bread.

GDP can be measured in three ways that should give the same answer: by adding up production across industries, by adding up spending on final goods and services, and by adding up incomes earned. The spending approach is the most familiar: consumer spending, plus business investment, plus government spending, plus exports minus imports.

GDP growth is reported as a percentage. If an economy's output rises from 2,000 billion to 2,050 billion in a year, nominal GDP has grown by 2.5%. Economists usually focus on real GDP, which removes the effect of inflation, to see whether the economy is actually producing more.

GDP per person is often used to compare living standards across countries. However, GDP has limits: it does not capture unpaid work, inequality, environmental damage or wellbeing, so it is best used alongside other measures.