GDP is the measure of all the final goods and services produced within a nation in a year. It is an important indicator of a country’s economic health and is often used to compare the level of wealth or standard of living between nations. GDP can be measured in “nominal” or “real” terms. Real GDP adjusts for inflation over time, making it easier to compare growth levels between periods. The Bureau of Economic Analysis (BEA) releases quarterly and annual real GDP estimates for the United States as well as for American Samoa, Guam, the Northern Mariana Islands, Puerto Rico, the U.S. Virgin Islands, and the District of Columbia. BEA also produces industry statistics for these areas and for counties, metropolitan areas, and the nation’s 34 states.
C (consumption) – private spending on consumer goods and services, including the purchase of durable and nondurable items like food, jewelry, gasoline, medical expenses, etc.
I (investment) – business spending on capital goods and equipment. Examples of investments include purchasing machinery, building new office buildings, and laying railroad tracks.
G (government spending) – government expenditures on final goods and services such as salaries of public servants, military spending and the purchase of weapons for the military. Government spending does not include transfer payments such as social security or unemployment benefits.
X (exports) – gross exports of goods and services. Note that GDP does not include the sale of intermediate goods, which are used up in the production of other final goods and services. For example, steel that is sold to a car manufacturer and then incorporated into a finished car is counted as part of GDP, but flour that is purchased by a bakery for use in baking bread does not.
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