What does GDP measure in economic terms?

Gross Domestic Product (GDP) is a crucial indicator that measures the overall productivity of an economy within a specified timeframe, usually annually or quarterly. It represents the total value of all goods and services produced in a country, reflecting the economic performance and health of that nation.

By measuring productivity, GDP provides insights into how efficiently resources are utilized in the economy. A higher GDP typically indicates a more productive economy, characterized by increased output and potentially higher living standards. It serves as an essential tool for policymakers, economists, and investors to assess economic growth, make comparisons between different economies, and make informed decisions based on economic conditions.

In contrast to the other options, GDP specifically captures total economic output rather than focusing on budget deficits, job creation metrics, or money supply. Measuring only the annual budget deficit might provide insights into fiscal health, but it does not encompass the entire economic activity. Similarly, while job creation is an important aspect of economic health, it does not directly measure overall productivity. Lastly, total money in circulation, or the money supply, is a different concept that relates to monetary policy but does not reflect the actual production of goods and services in the economy.