gross domestic product or GDP is a crucial measure of a country's economic performance it represents the total value of all goods and services produced over a specific time period imagine a giant P that shows how much a nation is producing the larger the pi the healthier the economy calculating GDP can be done in three main ways production income and expenditure the production approach sums up all outputs while the income method adds up all incomes earned in production the expenditure approach the most common totals all spending on final goods and services each method should ideally yield the same GDP figure but why does this matter a rising GDP indicates growth while a declining GDP can signal trouble GDP per capita which divides the GDP by the population offers insight into individual Prosperity a high GDP per capita suggests a higher standard of living