GROSS DOMESTIC PRODUCT
Economists are forever talking about economic expansion, about how fast the economy is growing in comparison to what they had expected, in comparison to last year, and in comparison to other countries. The measure they use for change in the economy is Gross Domestic Product (GDP).
The GDP is the total value of all the goods and services produced in the U.S., including everything we consume, everything the government purchases, all business investment, and all of our exports to the rest of the world, minus the imports we take in from the rest of the world.
The GDP was adopted as the official measure of economic output in the 1990s to replace GNP -- the Gross National Product. The difference is simple. The GNP includes the total value of all goods and services produced by U.S. citizens no matter where they produce it. U.S. corporations abroad -- whether in China or Brazil -- get counted as part of the GNP. Of course, while production abroad directly benefits the well being of those corporations, it does not necessarily increase the well being of the residents of the U.S. So GDP -- Gross Domestic Product -- value of goods and services produced within the U.S., regardless of the citizenship of the people owning the companies or resources -- is now the basis for calculating how well we are doing. It is the best measure of our overall economic health.
The U.S. GDP grew about 1.1 percent on an annual basis in the last three months of the year 2000 -- the slowest rate of economic growth in the last five years. That means fewer jobs and less wealth for the American people. Getting the GDP to grow robustly again is the primary challenge for the Bush administration.
To hear Professor Marvin Zonis, from the University of Chicago Graduate School of Business, talk about the Gross Domestic Product, check out our One Minute MBA video clip. Just click the appropriate connection speed in the video box on the right column of this page.