Gross Domestic Product (GDP) is a monetary measure of the market value of all the final goods and services produced in a specific time period by a country or countries. GDP is used to measure a countrys economic performance and is the standard measure of the value added created through the production of goods and services in a country during a certain period. GDP measures the economic activity within the physical borders of a country, whether the producers are native to that country or foreign-owned entities. GDP is calculated by adding up the following components:
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Consumption (C): This includes all private consumption, or consumer spending, in a countrys economy.
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Investment (I): This includes all business spending, private domestic investment, and inventories.
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Government spending (G): This includes all government spending on final goods and services.
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Net exports (NX): This is the value of a countrys total exports minus the value of its total imports.
GDP is important to economists and investors because it provides a snapshot of a countrys economic health and can be used to compare the economic performance of different countries.
