Definition of gross domestic product

The total value of an economy's domestic output of goods and services, also known as GDP.

One of the key indicators of economic growth. The other is GNP (gross national product), which is the same as GDP except that it adds what a country earns from overseas investments and subtracts what foreigners earn in a country and send back home.  Nominal GDP or GNP is calculated at market prices.

For a more accurate indication of economic growth, the impact of inflation or deflation can be removed to produce (inflation-adjusted) real GDP or GNP (also called at constant prices). This is done by applying a price deflator to nominal GDP/GNP. The deflator reflects changes in the prices of all the goods and services in the GDP/GNP, as opposed to other inflation indicators, such as the consumer price index (CPI), which look at a basket of goods.

Nominal GDP and GNP are normally calculated on a factor cost basis (at market prices equivalent to the cost of the factors of production). But the value of output can also be estimated by looking at the national income earned from the production of goods and services. Some countries monitor GNI (gross national income) as the key indicator of economic growth.