GDP.

In plain English

GDP, short for gross domestic product, is the single number economists use to size up a whole economy. It adds up the market value of everything produced inside a country's borders over a period: cars, haircuts, software, restaurant meals, government services, and more. When GDP grows, the economy is producing more than before; when it shrinks for two quarters in a row, people often call that a recession. "Real" GDP strips out the effect of rising prices so you can see whether the country actually made more stuff, not just charged more for it.

01Why it matters

GDP shapes whether jobs are being created or cut, whether the Federal Reserve raises or lowers interest rates, and whether your raise this year keeps up with a growing or stalling economy.

02The math, step by step

Imagine a tiny country that produces only bread. In year one it bakes 100 loaves at $2 each, so its GDP is $200. In year two it bakes 110 loaves, still $2 each, so GDP rises to $220, a real 10 percent gain because more bread was actually made. If instead it baked the same 100 loaves but raised the price to $2.20, GDP would also show $220, but real GDP would be flat, because the extra dollars came from higher prices, not more output. For the actual current U.S. figure, see bea.gov.

03What this is NOT

04Receipts

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