GDP is a key measure of a country’s economic health. It’s an important number for investors, policymakers, and business leaders to understand.

GDP measures the monetary value of all the goods and services produced within a nation in a given period. It can be calculated using either the expenditure or income approach. The expenditure approach adds up all the spending in an economy, while the income approach takes into account what everyone earned during a certain period. Both approaches should produce the same result. Most nations release GDP data at the end of each quarter. The advance release usually has the most market impact, with subsequent releases having less of an effect unless there’s a large variance from the advance estimate.

There are three main components of GDP: consumption, investment, and government spending. Consumption includes the purchase of all goods and services, and it makes up the largest component of GDP. Professionals typically view a steadily increasing consumption figure as an indication of a robust economy.

Investment is the purchase of fixed assets, such as machinery and equipment. It’s an important component of GDP because it enables businesses to increase their productivity and create jobs. Government spending is the amount of money a government spends on things like salaries for public servants and military purchases. The last component of GDP is gross exports, minus the value of imports.

If you’re comparing GDP between two countries with different currencies, it’s necessary to adjust the numbers for exchange rates. This is done by using market exchange rates or purchasing power parity, or PPP, equivalent exchange rates.