GDP is a standard measure of the value of all final goods and services produced within a country during a certain period. It is the best and most widely used indicator of economic growth. It is released by most countries regularly, usually monthly or quarterly, although it can be reported on a much less frequent basis. GDP is calculated in different ways by different countries, but the formula and metrics are similar across the globe.
A few important things to note about GDP: It measures consumption, investment, government purchases and net exports. Consumption is the most familiar component of GDP, and it represents the amount of products and services purchased by citizens and businesses. Professionals generally view a steadily increasing consumption rate as a sign of a healthy economy. Investment represents the amount spent by businesses to acquire and use machinery, buildings, inventory and other assets that will provide future benefits. Government purchases include the salaries of public servants, weapons for the military and other spending by government agencies. Net exports are the value of all final goods and services sold abroad, minus the value of all imports.
The calculation of GDP can be influenced by several factors, including quality improvements and the inclusion or exclusion of new products. For example, a new computer may have lower production costs but higher monetary value than a previous model because it has more memory and processing power. This can understate real economic growth.