Gross domestic product (GDP) measures the value of total production during a period of time, usually a year. GDP became the standard measure of total market output in the United States in 1991; previously gross national product (GNP) was used as the standard. In the United States, the Bureau of Economic Analysis (BEA), a branch of theDepartment of Commerce, estimates GDP as part of the national income accounts. At present it releases each quarterly GDP report three time: initially an advance estimate, a month later a preliminary estimate, and then a revised or final estimate. Estimates of GDP are frequently revised still further in later years as new information becomes available.
GDP can change for two reasons: production can change or prices can change. Because for most purposes only the changes in production are highly pertinent, the BEA computes a statistic called "real" GDP that eliminates the effects of changing prices. This measure is sometimes also called "inflation-adjusted" GDP or "constant-dollar" GDP.
Most attention is focused on the rate of change in real GDP from quarter to quarter or from year to year rather than in the dollar amount. Macroeconomic policy makers would like real GDP to grow at the rate allowed by growth in resources and technology. Often GDP does not grow at this rate. In periods of recession, real GDP will decline or grow very slowly. On the other hand, if real GDP grows too fast for too long, there is a tendency for inflation to increase.
Robert E. Schenk