Gross domestic product

(GDP).

A measure of the monetary value of total output of finished goods and services produced using factors of production located in the country whose GDP is being measured in the time period over which it is being measured.

It is commonly measured in three ways.

1. An output measure: the value of goods and services produced by all sectors of the economy, often taken as agriculture, manufacturing, energy, construction, the service sector and government.
2. An expenditure measure: the value of the goods and services purchased by households and governments, investment in machinery and buildings and exports minus imports.
3. An income measure: the value of income generated mostly in terms of profits and wages.

In principle the three methods should produce the same answer, but they are each estimated in ways that are practical but not quite fitting the theory.

Indeed how the theory should be applied is often disputable.

Some of this is discussed in the article on inflation.

GDP equivalents can also be estimated for regions, or indeed the entire world.

What’s not captured in GDP statistics?

"GDP growth, however, is not the whole story when gauging how well economies are doing.

To begin with, some things have a lot of value but are not captured in GDP because no money changes hands. Caring for an elderly relative would be one example of this...

Finally, there are things which raise GDP that don’t make the country better off. War is one example (a lot of money is spent, so GDP goes up).

Or if a large chunk of the Amazon rainforest was cut down in one week, then you’d get a sharp rise in GDP from the sales of timber but at huge environmental cost.

What are wider measures of well-being?

Because GDP is only one measure of the health of the economy, the ONS also collects data on broader measures of personal and societal wellbeing.

These include things like health, relationships, education and skills, what we do, where we live, our finances and the environment.

Other organisations look at other metrics of well-being and happiness.

The Happy Planet Index... for instance, gives a measure of how well nations are doing at achieving long, happy and sustainable lives."

(Gross domestic product - Bank of England.)

See also

• Balance of payments
• Bank of England
• Black economy
• Double dip
• Environmental concerns
• Genuine Progress Indicator (GPI)
• Gross fixed capital formation
• Gross National Income (GNI)
• Gross national product (GNP)
• Happy Planet Index (HPI)
• Inflation - see 'Points to note'
• Office for National Statistics
• Product
• Real GDP
• Recession
• Welfare
• Wellbeing

Other resources

• GDP and wider measures of wellbeing - Bank of England
• Beyond GDP - UK Office for National Statistics blog