Subtitles section Play video Print subtitles Welcome to the Investors Trading Academy talking glossary of financial terms and events. Our word of the day is "GROSS DOMESTIC PRODUCT (GDP)" Gross Domestic Product is commonly referred to as GDP. The GDP is one of the primary indicators used to gauge the health of a country's economy. It represents the total dollar value of all goods and services produced over a specific time period - you can think of it as the size of the economy. Usually, GDP is expressed as a comparison to the previous quarter or year. For example, if the year-to-year GDP is up 3%, this is thought to mean that the economy has grown by 3% over the last year. As one can imagine GDP has a large impact on nearly everyone within that economy. For example, when the economy is healthy, you will typically see low unemployment and wage increases as businesses demand labor to meet the growing economy. A significant change in GDP, whether up or down, usually has a significant effect on the stock market. It's not hard to understand why: a bad economy usually means lower profits for companies, which in turn means lower stock prices. Investors really worry about negative GDP growth, which is one of the factors economists use to determine whether an economy is in a recession. Measuring GDP is complicated which is why we leave it to the economists, but at its most basic, the calculation can be done in one of two ways: either by adding up what everyone earned in a year called the income approach, or by adding up what everyone spent known as the expenditure method. Logically, both measures should arrive at roughly the same total.