Gross Domestic Product (GDP)

GDP refers to the total value of a nation's production of goods and services.

The formula for GDP is: consumer spending (C) + business investment (I) + government spending (G) + net exports (X-M). Nominal GDP refers to the unadjusted total, whereas "Real GDP" adjusts that total to account for inflation.

Simon Kuznets invented the notion in 1937. It has since become the guiding metric to measure not only the volume and value of national production, but the welfare of the nation. Of all the criticisms of such "fetishization of GDP" (Joseph Stiglitz), the simplest may be that given by Kuznets himself, who wrote: "The welfare of a nation can scarcely be inferred from a measurement of national income."

Thirty years later, Kuznets adds: “Distinctions must be kept in mind between quantity and quality of growth, between its costs and return, and between the short and the long term. Goals for more growth should specify more growth of what and for what.”