Gross Domestic Product (GDP)
Gross Domestic Product is the summary of the National Income and Product Account (NIPA) tables, which is provided by the U.S. Department of Commerce’s Bureau of Economic Analysis (BEA). GDP estimates the market value of all final goods, services, and structures produced in a given period by labor and property located in the U.S., regardless of who owns the resources. Calculation of GDP involves estimating the quantity of those commodities produced, assigning a dollar value to each quantity and aggregating the total dollar value to arrive at a final figure. GDP can be expressed in two ways, nominal and real. Nominal GDP is the value of the final output measured in current prices, whereas real GDP is the value of output adjusted to remove distortions caused by price changes through the process of chain-weighting. GDP estimates are released quarterly [see appendix 2, slide 5]. Three estimates are made, one at the end of each month following a release: advance, preliminary, and final. On average, the final estimate falls within +/- 0.7% of the advance estimate1. Over time GDP has become the most comprehensive measure of production, and almost every economic statistic is related to GDP in one way or another. However there are drawbacks to GDP. It does not include nonmarket transactions or underground economies, it has frequent revisions and long compilation time and, GDP has income gaps/disparities. Although it generally correlates to standard of living, it does not inform us about quality of life. For instance, when a neighborhood park is replaced with a landfill. GDP is a massive compilation of data and analysis, yet it is still a gross tally. Because of the factors mentioned herein, the value of GDP does have limits. Perhaps the measure of its value is to the extent that it provides a historical context in which to view, evaluate, and correlate other economic indicators. Industrial Production Index (IPI)
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