What does GDP stand for, and what does it measure?

Gross Domestic Product, abbreviated as GDP, represents the total market value of all final goods and services produced within a country in a specific time period, typically measured annually or quarterly. This metric is crucial as it provides an overall snapshot of a nation's economic activity and health. By calculating GDP, economists and policymakers can gauge the size of the economy, track its growth or contraction, and make informed decisions on fiscal and monetary policies.

The formulation of GDP illustrates how it encompasses both production and consumption, as it includes the final goods and services that are either consumed domestically or exported. It's important to understand that GDP focuses only on final products to avoid double counting the value of intermediate goods used in production. This makes it a powerful and comprehensive measure of economic performance, reflecting the country’s ability to produce goods and services efficiently. The correct choice encapsulates this definition accurately.