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Gross domestic product (G.D.P.)

A measure of the total flow of goods and services produced by the economy over a specified time period, normally a year. It is obtained by valuing outputs of goods and services at market prices, and then aggregating. Note that all intermediate products are excluded, and only goods used for final consumption or investment goods are included. This is because the values of intermediate goods are already implicitly included in the prices of the final goods. The word ‘gross’ means that no deduction for the value of expenditure on capita! goods for replacement purposes is made. Because the income arising from investments and possessions owned abroad is not included, only the value of the flow of goods and services produced in the country is estimated; hence the word ‘domestic’ to distinguish it from the Gross national product. Since no adjustment is made for indirect taxes and subsidies, the measure here defined is often referred to as ‘Gross domestic product at market prices’.

Reference: The Penguin Dictionary of Economics, 3rd edt.