GDP measures a country’s market value of all the goods and services it produces in one year. It’s a key measure within a larger framework of economic statistics called national accounts. National account data is compiled by a country’s statistical agency, often following the international standard set by the UN’s System of National Accounts (SNA).
Economists use GDP to understand a nation’s economy, and to compare economies. They look at changes in inflation-adjusted GDP over time to see if a nation’s economy is growing or slowing down.
A nation’s GDP is made up of four parts: consumer spending, investment, government spending and net exports. The Bureau of Economic Analysis reports GDP for the US and many other countries and territories.
The way economists calculate GDP has evolved over the years to improve its accuracy and specificity. A few examples of nuanced modifications include including the sale of land and other intangible assets, excluding energy subsidies, and accounting for the quality improvement and inclusion of new products such as antibiotics and cell phones.
However, critics point out that GDP focuses on material output and ignores factors such as environmental impact, income inequality and the cost of living. For this reason, other metrics such as the Genuine Progress Indicator and Gross National Happiness have been developed to complement GDP and better measure a nation’s well-being.
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