Why is GDP important?

Gross Domestic Product (GDP) is a critical indicator because it assesses a country's economic health by measuring the total value of all goods and services produced within a country over a specific time period. An increase in GDP typically indicates a growing economy, which suggests higher employment rates, increased consumer spending, and greater business investment. Conversely, a decline in GDP can signal economic trouble, leading to job losses and reduced consumer confidence.

Understanding GDP helps policymakers assess economic performance and make informed decisions regarding fiscal and monetary policies. It provides a snapshot of the economy's overall activity and can be used to compare economic productivity between different countries or regions. This makes it a vital tool for both economists and government officials in determining the effectiveness of economic policies and initiating appropriate responses to economic challenges.