Summary
Highlights
GDP, or Gross Domestic Product, is the dollar value of all final goods and services produced within a country's borders in a given year. It's a key metric for measuring economic growth and the well-being of citizens. Goods are counted in the GDP of the country where they are produced, regardless of the company's origin.
GDP is calculated using the formula C + I + G + Xn. 'C' represents consumption by individuals, 'I' is investment by businesses, 'G' is government spending, and 'Xn' (exports minus imports) represents net exports. In the US, net exports are often a negative number because imports exceed exports.
There are three main categories of items not included in GDP: intermediate goods (components used to produce final goods), non-production transactions (like the sale of stocks, bonds, or used goods, as nothing new is produced), and non-market activities (illegal transactions or household production like personal home repairs).