What is GDP stand for? It is short for gross domestic product, the total market value of all the final goods and services produced inside a country during a set period, usually a quarter or a year. It is the most common single number used to describe the size of an economy and whether it is growing or shrinking.
When a news report says "the economy grew 2 percent," it almost always means GDP grew. In the United States the figure comes from the Bureau of Economic Analysis, part of the Commerce Department, which releases an early estimate each quarter and revises it as more data arrives.
Quick facts
Stands for
Gross domestic productType
Initialism, said G D PMeasures
Value of final goods and services made within a countryUS source
Bureau of Economic AnalysisReported
Quarterly and yearlyRelated terms
GNP, real GDP, GDP per capita, CPI
What is GDP stand for, word by word?
| Letter | Word | What it tells you |
|---|---|---|
| G | Gross | Nothing is subtracted for wear and tear on machines and buildings. |
| D | Domestic | Only production inside the country's borders counts, whoever owns the business. |
| P | Product | The output itself: goods like cars and bread, and services like haircuts and surgery. |
"Final" goods matter too. The flour a bakery buys is not counted separately, because its value is already part of the bread. Counting it twice would make the economy look bigger than it is.
What does GDP stand for in economics classes?
Economics students learn a simple way to add GDP up by who does the spending:
- Consumption: what households spend on goods and services.
- Investment: business spending on equipment and buildings, plus new homes.
- Government purchases: spending on things like roads, schools and defense.
- Net exports: exports minus imports.
Written as a formula, GDP equals C plus I plus G plus net exports. Consumer spending is by far the largest part in the United States, which is why reports on shoppers get so much attention.
Real GDP, nominal GDP and per capita
Nominal GDP uses current prices. If prices rise, nominal GDP rises even when nothing more is made. Real GDP adjusts for inflation so you can compare output across years, and it is the version behind most growth headlines. GDP per capita divides the total by the population, giving a rough sense of output per person, which helps compare a small rich country with a large one.
A news line: "Real GDP rose at an annual rate of 1.8 percent last quarter." This means output after inflation grew, and the quarterly change was stated as if it continued for a full year.
How the gdp full form shows up in the news
You will meet the letters in reports on jobs, interest rates and recessions. A common rule of thumb calls two quarters in a row of falling real GDP a recession, though in the United States the official call is made by a committee of economists who look at many measures, not GDP alone.
GDP also has limits. It does not count unpaid work at home, it says nothing about how income is shared, and it treats spending on cleanup after a disaster as output. Economists use it as one important gauge among several.
GDP vs GNP and other look alikes
- GNP, gross national product, counts output by a country's residents and companies wherever they produce it, instead of output inside the borders.
- CPI, the consumer price index, tracks prices, not output. It helps explain the gap between nominal and real GDP.
- CAGR, compound annual growth rate, is a way to express growth over several years, sometimes applied to GDP.
Say GDP letter by letter, "G D P." Spoken that way it is an initialism, a label explained in acronym vs abbreviation. Print it in capitals with no dots, and pair it with "a": "a GDP report." For CPI, ROI and dozens of other money terms, visit the business acronyms section.
Questions people ask
What does GDP stand for in simple terms?
Gross domestic product. Think of it as the price tag on everything a country makes and sells to final buyers in a quarter or a year.
Who measures GDP in the United States?
The Bureau of Economic Analysis in the Commerce Department. It publishes quarterly estimates and revises them as fuller data comes in.
Is a higher GDP always better?
Not by itself. Growth often means more jobs and income, but GDP does not show how income is shared, the value of unpaid work or the state of the environment.
What is the difference between GDP and GNP?
GDP counts output made inside a country. GNP counts output by a country's people and businesses, including what they earn abroad.
What does GDP stand for on a test question about growth?
It still means gross domestic product. Questions about growth usually expect real GDP, the version adjusted for inflation.