GDP is the single most important number in economics — the total value of everything a country produces. It measures the size and health of an economy. When GDP grows, the economy is expanding (more jobs, more production, more income). When GDP shrinks for two consecutive quarters, it is officially a recession.
Three ways to calculate GDP: expenditure approach (C + I + G + Net Exports) is most common — add up all spending by consumers, businesses, government, and net trade. The US has the world's largest GDP at $28.8 trillion (2024). China is second at $18.5 trillion. India ranks fifth at $3.9 trillion but is the fastest-growing major economy.
GDP per capita (GDP divided by population) better reflects living standards. Luxembourg leads at $131,000; India is around $2,700. Real GDP (adjusted for inflation) matters more than nominal GDP — a country with 10% GDP growth and 8% inflation is only 2% richer in real terms. Critics argue GDP misses inequality, environmental damage, and unpaid work.