Gross Domestic Product (GDP) measures the output of an economy, reflecting how much an economy produces.
It's used to measure economic growth, with an increase in GDP indicating an increase in economic output and thus growth.
GDP can measure two types of output: National GDP (the output of the whole economy) and GDP per capita (the output per individual of the population).
Gross National Product (GNP)
Gross National Product measures the output of a country, subtracting the output produced by foreign businesses located in that country.
GDP and Economic Growth
GDP is used to "keep score" between countries, with higher GDP indicating more economic respect and power.
Governments aim for positive GDP growth, as it signifies an expanding economy.
They also strive for stability in GDP growth to prevent economic decline due to unsustainable rapid growth.
GDP vs. Standard of Living
A high GDP does not necessarily equate to a high standard of living or quality of life.
Example: China, despite its high GDP and rapid economic growth, has a significant portion of its population living below the poverty line or with insufficient food and resources.
This highlights that GDP alone is not a comprehensive measure of a country's economic health or the well-being of its citizens.