Gross domestic product is the total market value of all final goods and services produced within a country's borders in a given period. It is the standard scorecard for economic size and growth. When news reports say the economy grew 2 percent last quarter, they are usually talking about GDP.

The measure has three ways to calculate it, which should all give the same answer: production, income, and expenditure. In practice, statisticians use a mix. They count consumer spending, business investment, government spending, and net exports. They adjust for inflation to get real GDP, which is what matters for living standards. Nominal GDP, unadjusted, can rise just because prices went up.

GDP has limits. It counts a prison or a polluting factory as economic activity. It ignores unpaid work like childcare and volunteering. It says nothing about how income is distributed. A country can have high GDP per capita and still have widespread poverty. Still, for all its flaws, no better single measure of economic output has emerged. Critics propose alternatives, but GDP remains the benchmark.

Components of GDP

• Consumption (C)
• Investment (I)
• Government spending (G)
• Net exports (X - M)
• Real versus nominal GDP