Gross Domestic Product. The total market value of all final goods and services produced in a country in a given year, equal to total consumer, investment and government spending, plus the value of exports, minus the value of imports.
The GDP report is released at 8:30 am EST on the last day of each quarter and reflects the previous quarter. Growth in GDP is what matters, and the U.S. GDP growth has historically averaged about 2.5-3% per year but with substantial deviations. Each initial GDP report will be revised twice before the final figure is settled upon: the "advance report" is followed by the "preliminary report" about a month later and a final report a month after that. Significant revisions to the advance number can cause additional ripples through the markets.
- Current dollar GDP is calculated using today's dollars and makes comparisons between time periods difficult because of the effects of inflation.
- Constant dollar GDP solves this problem by converting the current information into some standard era dollar, such as 1997 dollars. This process factors out the effects of inflation and allows easy comparisons between periods.
Gross National Product (GNP)
It is important to differentiate Gross Domestic Product from Gross National Product (GNP). GDP includes only goods and services produced within the geographic boundaries of the U.S., regardless of the producer's nationality. GNP doesn't include goods and services produced by foreign producers, but does include goods and services produced by U.S. firms operating in foreign countries.
For further explanation, see GDP vs. GNP – What’s the Difference?.
Use GDP in a sentence
“ The United States of America, even with high GDP ratings per year, still has a multi-trillion dollar deficit on its hands. ”
“ The management team felt confident to expand operations when the GDP, of the country that housed their factory, was reported to have increased over the previous year. ”
“ The GDP of the United States is typically much larger than most nation states. In order to have a large GDP one must export a large portion of its manufactured goods. ”