Gross Domestic Product (GDP)

Gross Domestic Product (GDP), or the measure of all the products made, services offered, and business conducted in a country over a set period of time, is another one of those business terms that’s frequently referenced but seldom understood. Once again, GDP is simply a calculation of the business that’s taken place in a country annually. The United States, for example, has the largest GDP in the world, thanks to its free market and large population; other nations have solid GDPs as well, and the exact number usually corresponds to its country’s economic system, development, natural resources, education, and more.

Similarly, the process of calculating GDP is simple and straightforward. GDP is comprised of “private consumption + total investments + government investments + government spending + the value of exports minus imports.” In other words, gross domestic product, which is once again the measure of all the business that’s taken place in a country over a period of time, is determined by adding together money spent on private consumption, personal investments, government investments, government spending, and the value of exports (minus imports, so that the total reflects the trade agreements that give money to the country at-hand).

Lastly, nominal GDP refers to a specific year’s gross domestic product purely in terms of production, while real GDP accounts for inflation, and is typically consulted by economists attempting to contrast a country’s current output with those of the past.

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