What is GDP and what does it measure?

Gross Domestic Product (GDP) is an economic indicator that quantifies the economic activity in a country – the value of goods and services produced. This includes market transactions which are bought from companies, but also public services provided by the government. That number can be calculated for a year, but many countries also publish GDP figures on a quarterly basis.

Usually when the press reports GDP they report on the growth in GDP. That is, the increase in economic activity compared to the previous year or quarter. “The economy grew by 2,3% over the last year” is referred to as economic growth. Since the value of money and purchases can change over time due to inflation, the nominal GDP data needs to be corrected for price changes to measure economic growth.

GDP is a good measure of economic activity - the purpose for which it was designed. However, a relentless focus on GDP becomes a problem when GDP is interpreted as a metric for the “success of society” or economic growth as an indication of “societal progress”. The economy can contribute to success, but it is a means to an end, not an end itself. Read more about the problems of (our current use of) GDP here.

Do you want to know more about GDP and Beyond-GDP? Take a look at the Frequently Asked Questions.