GDP is a key number that policymakers, investors and businesses use to understand how healthy a nation’s economy is. It can also be used to compare the economies of different nations. GDP is a measure of the monetary value of all the goods and services produced in a country during a certain period. This includes production from private households and businesses, government spending on goods and services, and the difference between exports and imports. Real GDP is calculated by using a price deflator to adjust nominal GDP for inflation.
Although GDP is a useful indicator, it has its limitations. For example, it can be misleading if it is not adjusted for quality improvements and the introduction of new products. Also, it does not take into account social and environmental costs of economic activity such as deforestation, strip mining and overfishing. These activities may actually increase GDP, but they are not good for society in the long run. To try to address these issues, the United Nations has developed the Human Development Index and other yardsticks of well-being that include measures such as life expectancy and literacy.
GDP is calculated by a country’s national statistical agency, which follows international standards set in 1993 by the International Monetary Fund, the European Commission, the Organization for Economic Cooperation and Development and the United Nations. In the United States, the Bureau of Economic Analysis (BEA) of the U.S. Department of Commerce calculates GDP and other economic indicators. These statistics are published in the Federal Reserve System’s Economic Data and Time Series, or FRED.