Gross Domestic Product (GDP) is the total market value of all finished goods and services produced within a country in a set time period, usually a year. It is considered as one of the most important indicators of economic performance and is widely used to measure the overall health and growth of a country's economy.

Explanation:

Gross Domestic Product (GDP) measures the economic activity within the geographical boundaries of a country. It takes into account all the goods and services produced within the country, regardless of whether the production is done by domestic or foreign entities. GDP includes both tangible goods, such as cars and machinery, as well as intangible services, such as healthcare and education.

Here is a breakdown of the components that contribute to GDP calculation:

1. Consumption (C): This includes all the spending by households on goods and services, such as food, housing, transportation, and entertainment.

2. Investment (I): This refers to the spending by businesses on capital goods, such as machinery, equipment, and infrastructure. It also includes investments in research and development, as well as changes in inventories.

3. Government Spending (G): This includes all the spending by the government on goods and services, such as defense, infrastructure, education, and healthcare. It does not include transfer payments, such as social security benefits or welfare.

4. Net Exports (X-M): This accounts for the difference between exports and imports. If a country's exports are greater than its imports, it has a trade surplus, and this contributes positively to GDP. Conversely, if imports are greater than exports, it has a trade deficit, which subtracts from GDP.

GDP can be calculated using either the production approach, which adds up the value of all goods and services produced, or the expenditure approach, which sums up all the spending on goods and services. Both methods should yield the same result.

It is important to note that GDP only measures the value of final goods and services. Intermediate goods, which are used in the production process, are not included in GDP to avoid double-counting.

In conclusion, Gross Domestic Product (GDP) is the measurement of the total market value of all finished goods and services produced within a country. It considers consumption, investment, government spending, and net exports to provide an overall picture of the country's economic performance. GDP is a crucial indicator for policymakers, businesses, and investors as it reflects the size and growth rate of an economy.