1. What is GDP?

Gross Domestic Product (GDP) is the total monetary value of all finished goods and services produced within a country's borders in a specific time period. It's the most comprehensive measure of a nation's overall economic activity.

2. GDP Components

GDP is calculated using the expenditure approach formula:

Where:

• \( C \) — Consumption: Spending by households on goods and services
• \( I \) — Investment: Business expenditures on capital and households on new housing
• \( G \) — Government Spending: Government consumption and investment
• \( NX \) — Net Exports: Exports minus imports (can be negative)

3. Importance of GDP

Details: GDP is the primary indicator used to gauge the health of a country's economy. It's used to compare economic performance between countries and over time, influence monetary and fiscal policy decisions, and determine economic growth rates.

4. Using the Calculator

Tips: Enter all values in USD. Net exports can be positive (trade surplus) or negative (trade deficit). All values should be for the same time period (quarterly or annual).

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between nominal and real GDP?
A: Nominal GDP is measured in current prices, while real GDP is adjusted for inflation to allow comparison across time periods.

Q2: What's not included in GDP?
A: GDP excludes intermediate goods, used goods, financial transactions, transfer payments, and non-market activities.

Q3: How often is GDP calculated?
A: Most countries calculate GDP quarterly and annually. The U.S. releases advance estimates about a month after each quarter ends.

Q4: What is GDP per capita?
A: GDP divided by population, used as a measure of standard of living and to compare economies of different sizes.

Q5: What are limitations of GDP?
A: GDP doesn't account for income inequality, environmental degradation, unpaid work, or overall well-being.