What is the Difference Between GDP and Growth Rate?

Question: What is the Difference Between GDP and Growth Rate?

Answer: GDP (Gross Domestic Product) is the total dollar amount of all goods and services produced. The growth rate is the percentage increase or decrease of GDP from the previous measurement cycle. Even though the BEA reports quarterly, the growth rate is annualized so it can be compared to the previous year.

The GDP growth rate is driven by retail expenditures, government spending, exports and inventory levels. Rises in imports will negatively affect GDP growth.

The GDP growth rate is the most important indicator of economic health. If GDP is growing, so will business, jobs and personal income. If GDP is slowing down, then businesses will hold off investing in new purchases and hiring new employees, waiting to see if the economy will improve. This, in turn, can easily further depress GDP and consumers have less money to spend on purchases. If the GDP growth rate actually turns negative, then the U.S. economy is heading towards a recession.

Because so many things are measured in GDP, the BEA often revises the GDP growth rate within a month after releasing it. This can impact the stock market as investors get this new information about the state of the economy’s health. To see how the GDP growth rate has been changed, see GDP Current Statistics

GDP FAQ

• What Are the Components of GDP?
• What Is the Difference Between GDP and Growth Rate?
• What Is the Ideal Growth Rate?
• What Is a Recession?
• What Is a Depression?