The gross domestic product (GDP) measures the value of all the final goods and services produced in a nation. It is an important economic indicator because it provides a snapshot of the economy’s health and is often used to compare the performance of economies. The GDP of high-income nations, such as the United States, Canada, most Western European countries and Japan, is typically much higher than that of middle-income countries, such as India and China, and low-income nations, such as sub-Saharan Africa.
The CIA World Factbook estimates GDP for all sovereign entities and some non-sovereign territories. The CIA’s data is updated quarterly and is available at purchasing power parity. GDP is reported in current dollars, which makes comparing the numbers of different time periods difficult. A more meaningful measure is “real” or “chained” GDP, which adjusts for inflation so that the same number can be compared over time.
In addition, GDP does not include all economic activity. It excludes activities that are not produced through market transactions, such as household production or volunteer work. It also does not include the black or gray economy, which consists of activities that are not recorded in the official market, such as smuggled cigarettes and drugs, counterfeit goods, prostitution and illegal gambling.
GDP is also limited in that it rewards behaviors that are harmful to the environment, such as excessive driving, which contributes to traffic jams and air pollution, but does not reflect a decrease in other productive activities, such as the brewing of beer or the growth of vegetables. For these reasons, alternative measures of a country’s economic health have emerged, such as the human development index.
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