Gross Domestic Product (GDP) is a measure that represents the total value of all goods and services produced within a country's borders over a specific period, typically a year. It serves as a key indicator of a country's economic performance and is used to assess and compare the size and growth of economies.
GDP measures the total economic output of a country. It takes into account the value of goods and services produced by various sectors, including agriculture, manufacturing, services, and construction. Measuring GDP allows for international benchmarking and analysis of economic trends. However, other factors such as population size, exchange rates, and purchasing power parity when making cross-country comparisons should also be considered.
Changes in GDP from one period to another indicate the rate of economic growth or contraction. Positive GDP growth suggests an expanding economy, while negative growth indicates a shrinking economy. The growth rate of GDP is often used to assess the health and trajectory of an economy, as higher growth rates are generally associated with increased prosperity. While higher GDP per capita suggests the potential for higher levels of consumption and well-being, it does not capture the distribution of income or quality of life factors.