Gross Domestic Product (GDP) represents the value of goods and services that a country or region produces within a particular period of time. Though it is usually reported annually, many countries determine GDP on a quarterly basis as well. Quarterly GDP is the value of those goods and services produced within a specified three-month period of a calendar year.
Calculation of Gross Domestic Product includes the complete value of all products and services from within the country. Spending from individual consumers, businesses, and governments is factored into the total. The net trade balance — the value of exported goods minus the value of imported goods — is also accounted for. Quarterly GDP results also incorporate certain intangible values, such as investment income and the fair rental value of a home in which the owner is living. Wages earned by someone working outside of the country are not considered for purposes of GDP.
In the world of macroeconomics, there are two variations of quarterly GDP values. Nominal GDP reflects the value of goods and services at the prices that prevail at the time the results are calculated. It includes no adjustments for price fluctuations over a period of time. Real GDP factors in the effects of inflation and calculates the value using prices from a pre-defined time period, normally referred to as the base year. Real GDP values will generally be less than nominal GDP values and are used in most economic models.
Quarterly GDP results are useful as a gauge of a country’s economic strength. The figures also help in measuring the standard of living for a country or region. In determining the standard of living, economists usually compute the GDP per capita. This is done by dividing the total GDP by the number of people inhabiting the country. The resulting figure indicates an average amount of the GDP per person.
The values found in quarterly GDP also help evaluate the growth rate of an economy. This can alert government about the potential need for a change in monetary or fiscal policy. GDP assessments also serve as a good basis for comparing the size and growth rate of economies of different countries.