Gross Domestic Product (GDP)

Definition

GDP is the total value of all goods and services produced by a country in a specific time period. It's one way to measure the size and health of a country's economy.

Analogy

Think of GDP like your school report card, but for a country's economy. Just as your grades reflect how well you're doing in different subjects, GDP shows how well a country is doing economically by looking at what it produces.

Related terms

Nominal GDP: This is the raw measurement of GDP without taking into account inflation or deflation. It’s like getting your test score without any curve applied.

Real GDP: This measures the value of economic output adjusted for price changes (inflation or deflation). It’s like seeing your grade after it has been curved, giving a more accurate picture of performance over time.

Per Capita GDP: This is the GDP divided by the total population of a country. Imagine if your class grades were averaged out - that would be similar to per capita GPA!