What Is GDP and Why Is It So Important to Economists and Investors?

Gross domestic product (GDP) is one of the most widely used indicators of economic performance. Gross domestic product measures a national economy's total output in a given period and is seasonally adjusted to eliminate quarterly variations based on climate or holidays. The most closely watched GDP measure is also adjusted for inflation to measure changes in output rather than changes in the prices of goods and services. Annual GDP totals are frequently used to compare national economies by size. Policymakers, financial market participants, and business executives are more interested in changes in the GDP over time, which are reported as an annualized rate of growth or contraction. This makes it easier to compare annual and quarterly rates. Real (inflation-adjusted) U.S. GDP increased by 1.3% on an annualized basis for the first quarter of 2024 compared to an increase of 3.4% in the fourth quarter of 2023.Key TakeawaysGross domestic product tracks the health of a country's economy.It r...