GDP measures the total amount of goods and services produced by a country in a given period. It includes all market and government-funded activities, such as manufacturing, mining, farming, and trading. It also includes construction, transportation, and communication, among other things. Its components are C (consumption), I (investment), and G (government spending). It is calculated as a country’s gross domestic product, or GDP, minus its net exports. The international organization OECD hosts one of the most reliable web-based databases for GDP statistics, and the United States Bureau of Economic Analysis (BEA) produces its own data. The BEA releases its advance estimate of GDP about a month after the end of each quarter, and then produces two more estimates that incorporate additional source data as time passes, improving accuracy.
GDP is measured at current prices, or nominal GDP. To compare GDP between periods, economists use a process called “rescaling,” which converts it to constant prices using a price deflator. This makes the comparisons more accurate but may overstate the actual rate of growth, since prices are rising faster than output is increasing. For this reason, some economists prefer to use a measure called real GDP, which excludes inflation.
GDP figures are widely used by businesses, governments, and researchers to understand economic trends, forecast future growth, and compare economies. Government entities, such as central banks, closely follow GDP growth to determine their monetary policies. For example, if the economy is growing too fast, they might increase interest rates to slow it down or decrease them to stimulate growth.