GDP

GDP stands for gross domestic product. It’s the total monetary value of everything produced within a country, and is used as a measurement of a country’s economic status and growth.

How is GDP pronounced?

[ jee-dee-pee ]

One prominent way to assess a country’s economy—and compare it to others—is by calculating its gross domestic product, or GDP, a term that describes the overall value of all the goods and services made within a single country. That includes those produced by foreign-owned companies. In the U.S., the Bureau of Economic Analysis provides an estimate of GDP and its growth rate each quarter, called a nominal GDP. Real GDP, usually calculated on yearly terms, accounts for inflation and deflation.

What separates the concept of GDP from GNI, or gross national income (previously GNP, or gross national product), is that the former measures products made within a country, whereas the latter measures products made specifically by the citizens of that country. The GDP growth rate of an individual country is the calculation of how much the country’s GDP is growing from quarter to quarter.

Ecuador’s gdp annual growth rate to stand at 1.30 in 12 months time & it is projected to trend around 1.30 percent in 2020 (Trading Economics 2018). #economics #growthmanagement pic.twitter.com/3zMbNbF9XM

— Melanie James (@MelaniekJames) November 13, 2018

English economist William Petty devised the original concept of measuring GDP in the late 1600s as a way of preventing excessive taxation against landlords—although he never used the term GDP.

In 1944, the Bretton Woods Conference established international standards and cooperation among 44 countries, and GDP was established as the standard measurement of economic growth within a country. The phrase gross domestic product was in use by the 1950s, its common abbreviation, GDP, by the 1960s. The word gross as used here means “entire” or “total,” e.g., the gross amount.

GDP began in response to the economic devastation of the Great Depression. In 1937, economist Simon Kuznets charted all economic production within the United States from 1929 to 1935, both positive and negative, and presented his “national income” results to Congress. As the United States considered entering World War II amid widespread fear of another economic catastrophe, Kuznets’s GDP statistics were used to demonstrate that entering the war would not prevent the country’s economic recovery.

I got lots of questions on my earlier post about output gap estimates that are suspect. So here's a bit more detail. Chart shows real GDP levels for the US, the Euro zone, and key Euro periphery countries. Real GDP levels have diverged massively since 2008. pic.twitter.com/hbydJ4eLuZ

— Robin Brooks (@RobinBrooksIIF) November 12, 2018

Economists stress that GDP is not an evaluation of economic or social well-being, since a high GDP could still exist despite economic turmoil or income inequality. This distinction continues to be misunderstood to this day—though some understand it quite well, such as Jigme Singye Wangchuck, who became the king of Bhutan in 1972 and stated that his purpose was to, rather than increase the GDP, increase its GNH, or gross national happiness.

Move over GDP, #happiness wants to be the metric of the future https://t.co/C0RNEpZDq9 #economics pic.twitter.com/g0Ipxm1q8K

— World Economic Forum (@wef) November 12, 2018

Economic measurements closely related to GDP include GNP (gross national product), now often called GNI, or gross national income, which adds a country’s GDP to all the income made by its citizens living abroad.

Nairobi is not the engine of the Kenya economy. Its very ordinary, 13% of GDP, and ranking 13th in productivity behind Garissa, Wajir and Tana River https://t.co/EkMtvGdVQs pic.twitter.com/5KFwWmlq8F

— Educated chokoraa, spricht deutsch (@DavidNdii) November 12, 2018

Italy looking to cut 2019 GDP estimates to find deal with EU Commission: newspapers https://t.co/aiJfw9MtKd pic.twitter.com/JozeBrnxwI

— Reuters (@Reuters) November 11, 2018

More examples of GDP:

“The ratio of debt to GDP, now 77 percent (twice the average of the past half-century) would approach 100 percent in a decade and top 120 percent in two decades.”
—Howard Gleckman, Christian Science Monitor, February 2017

“It only grew at an annual pace of 0.7% in the first three months of the year, according to the Commerce Department’s report on gross domestic product, the broadest measure of economic activity.”
—Patrick Gillespie, CNN, April 2017

This content is not meant to be a formal definition of this term. Rather, it is an informal summary that seeks to provide supplemental information and context important to know or keep in mind about the term’s history, meaning, and usage.