What does GDP measure?

Gross Domestic Product (GDP) measures the total value of all goods and services produced within a country's borders in a specific time frame, typically a year or a quarter. This indicator is crucial as it provides a comprehensive overview of a nation’s economic performance. By capturing the value of production, GDP reflects the health of an economy, illustrating how well it is functioning and growing.

Understanding GDP allows stakeholders, including policymakers and economists, to assess economic performance over time, compare economic productivity across different countries, and evaluate the effectiveness of economic policies. It captures all areas of economic activity, including consumption, investment, government spending, and exports minus imports, providing a well-rounded view of an economy's capacity and output.

This measurement is distinct from other economic metrics because it focuses solely on where the production occurs geographically—within a country—rather than the broader global production or average income levels of its citizens. Therefore, the choice regarding GDP accurately captures its definition and significance in economic analyses.