A country’s gross domestic product (GDP) is a standard measure of economic output. It is typically reported on a quarterly basis. GDP figures are closely watched by entrepreneurs, investors and government officials. GDP fluctuations can help indicate the health of a country’s economy or even a specific sector.

Calculating GDP is complex because it involves adding up all the final goods and services sold within a nation’s borders during a specific period. This figure is calculated in different ways, but the most widely used is the expenditure approach, which takes into account consumption, investment, government spending and net exports. Another way to calculate GDP is through the production or value added method. This method determines a country’s GDP by first determining an industry’s output, then subtracting the cost of materials, supplies and services used to generate that output. This figure is then divided by the industry’s total output to get a gross value added number.

GDP is also susceptible to distortions because it only considers the market value of goods and services. It ignores the value of informal economic activity, which can be difficult to quantify and may not show up on official records. GDP also fails to take into account the distribution of income, which can be uneven among segments of a population. Finally, it overlooks business-to-business transactions and does not factor in the sale of services from one citizen to another.