What is GDP?
Gross domestic product (GDP) is used to estimate the size of the US economy. It is calculated as the value of all goods and services produced in the US. In 2019, GDP was $21.4 trillion.
GDP measures the amount of value added in the production process. There are two ways of measuring the production of a given product. We can look at the value at final sale or we can look at how much value was added at each stage of production. Imagine the production of a loaf of bread. A farmer produces the wheat and sells it to a bakery. The bakery takes the wheat and produces a loaf of bread that it sells to a grocery store. The grocery store then sells it to the final consumer. The loaf of bread may sell for $3 to the final consumer (and be counted as $3 in GDP), but the $3 can also be broken down at each of the production process. The $3 equals the total of the amount of value that was added at each stage of production.
