How does gross domestic product (GDP) provide a means to analyze economic growth?

1 Answer
Mar 15, 2016

Analysts look at the change in GDP to infer how much the economy has grown/shrunk.

Explanation:

GDP is an estimate of the total monetary value of all final goods and services produced in a time period (usually a year). It is representative of the size of the economy.

GDP is often presented as a percentage reletive to the previous value. For instance, if the year-to-year GDP is positive 2%, this is perceived to mean that the economy has enlarged by 2% over the past year.

A significant increase is GDP indicates that people are spending more money and that is a sign of a healthy economy. More people gets employed by companies to meet the high demands of the strong economy, resulting in increasing wages and low unemployment rate.