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Will the Canadian economy weaken through the next year and shrink, or will it remain strong and expand? To assess the state of the economy and to make big decisions about business expansion, firms use forecasts of GDP. What exactly is GDP?

How do we use GDP to tell us whether our economy is in a recession or how rapidly our economy is expanding?
How do we take the effects of inflation out of GDP to reveal the growth rate of our economic well-being? And how to we compare economic well-being across countries?
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Gross Domestic Product
GDP Defined GDP or gross domestic product is the market value of all final goods and services produced in a country in a given time period. This definition has four parts:
   

Market value
Final goods and services Produced within a country In a given time period

© 2010 Pearson Education Canada

Gross Domestic Product
Market Value GDP is a market value—goods and services are valued at their market prices. To add apples and oranges, computers and popcorn, we add the market values so we have a total value of output in dollars.

© 2010 Pearson Education Canada

Gross Domestic Product
Final Goods and Services GDP is the value of the final goods and services produced.

A final good (or service) is an item bought by its final user during a specified time period.
A final good contrasts with an intermediate good, which is an item that is produced by one firm, bought by another firm, and used as a component of a final good or service.

Excluding intermediate goods and services avoids double counting.
© 2010 Pearson Education Canada

Gross Domestic Product
Produced Within a Country
GDP measures production within a country—domestic production. In a Given Time Period GDP measures production during a specific time period, normally a year or a