ABSTRACT
This chapter introduces the broadest measure of the total output of an economy- that is, gross domestic product-and discusses the factors that determine the long-run growth rate of an economy. Economists have developed a single statistic to measure the output of an economy. This statistic is known as gross domestic product (GDP). GDP is the market value of all final goods and services produced within a country in a given year. The GDP of an economy can be calculated by totaling the expenditures on goods and services produced during the current year. When GDP is derived by the expenditure approach, it has four components: personal consumption expenditures, gross private domestic investment, government purchases of goods and services, and net exports to foreigners. For the United States, personal consumption expenditures are the largest component of GDP, typically accounting for two-thirds or more of GDP.
