Domestic Product (GDP)
The total value of goods and services produced within the borders of a
country, regardless of who owns the assets or the nationality of the
labor used in producing that output. The growth of output is usually
measured in real terms, meaning increases in output due to inflation
have been removed.
Importance: One goal (often unstated) of central banks is sustained
growth of the economy with full employment and stable prices. Real GDP
is the most comprehensive measure of the performance of an economy. By
monitoring trends in the overall growth rate as well as the unemployment
rate and the rate of inflation, policy makers are able to assess whether
the current stance of monetary policy is consistent with its policy
Between GNP and GDP
GDP (gross domestic product) is the total market value of goods and
services produced within the borders of a country regardless of the
nationality of those who produce them.
GNP (gross national product) is the total market value of goods and
services produced by the residents of a country, even if they’re
living abroad. So if a U.S. resident earns money from an investment
overseas, that value would be included in GNP (but not GDP).
GDP is generally the preferred measure of national output.