National Income Accounting: Gross Domestic Product
Definition of Gross Domestic Product and Exclusions from the Definition
Our current framework of national income accounting began in the 1930s when the need was pressing to monitor the effectiveness of New Deal policy actions. The primary measure used nowadays is Gross Domestic Product (GDP). GDP is defined as the total market value of all final goods and services produced within an economy’s boundaries in a given period of time.
Note the definition’s emphasis on production. This year’s GDP measures the value of what is produced this year, not how much is bought and sold this year. For this reason, we are not interested in resold goods or second-hand sales. Our focus is production—these goods ...