Term of the Day: GDP

Gross Domestic Product. The total market value of all final goods
and services produced in a country in a given year, equal to total
consumer, investment and government spending, plus the value of
exports, minus the value of imports. The GDP report is released at
8:30 am EST on the last day of each quarter and reflects the
previous quarter. Growth in GDP is what matters, and the U.S. GDP
growth has historically averaged about 2.5-3% per year but with
substantial deviations. Each initial GDP report will be revised
twice before the final figure is settled upon: the "advance" report
is followed by the "preliminary" report about a month later and a
final report a month after that. Significant revisions to the
advance number can cause additional ripples through the markets.
The GDP numbers are reported in two forms: current dollar and
constant dollar. Current dollar GDP is calculated using today's
dollars and makes comparisons between time periods difficult
because of the effects of inflation. Constant dollar GDP solves
this problem by converting the current information into some
standard era dollar, such as 1997 dollars. This process factors
out the effects of inflation and allows easy comparisons between
periods. It is important to differentiate Gross Domestic Product
from Gross National Product (GNP). GDP includes only goods and
services produced within the geographic boundaries of the U.S.,
regardless of the producer's nationality. GNP doesn't include
goods and services produced by foreign producers, but does include
goods and services produced by U.S. firms operating in foreign
countries.