Which of the following best describes what Gross Domestic Product (GDP) measures?

• A. The total amount of money in circulation within a country's economy
• B. The total income earned by a country's citizens, including those living abroad
• C. The total value of all intermediate goods produced in a country during a year
• D. The total market value of all final goods and services produced within a country's borders in a given period

Answer: (D)

Verified step by step guidance

1. Step 1: Understand the definition of Gross Domestic Product (GDP). GDP measures the total market value of all final goods and services produced within a country's borders during a specific time period, usually a year or a quarter.
2. Step 2: Differentiate between final goods and intermediate goods. Final goods are products purchased by the end user, while intermediate goods are used as inputs in the production of other goods. GDP includes only final goods to avoid double counting.
3. Step 3: Recognize that GDP focuses on production within a country's borders, regardless of the nationality of the producers. This means it includes production by foreign companies operating domestically but excludes income earned by citizens abroad.
4. Step 4: Distinguish GDP from other related concepts such as Gross National Product (GNP), which measures total income earned by a country's citizens including those living abroad, and money supply, which is the total amount of money in circulation.
5. Step 5: Conclude that the best description of GDP is the total market value of all final goods and services produced within a country's borders in a given period, as this captures the economic activity accurately without double counting or including income from abroad.