Review 1 of 2· Q1: Define GDP and how it’s measured

Gross Domestic Product (GDP) is the market value of all final goods and services produced within a country in a year. It is measured by adding up consumption, investment, government purchases, and net exports, which is called the expenditure approach; the same total can also be reached by adding incomes or by adding each producer’s value added. Value added means the difference between what a firm sells and what it buys from other firms. Most output is valued at market prices, though some services, like the housing that homeowners provide to themselves, are given imputed values because they are never sold in a market. Intermediate goods are excluded so that output is not counted twice.