jmherbenerGDP is the monetary value of all final goods produced domestically during a period of time. Final goods are those in the hands of final users. They include goods bought by consumers, governments, businesses, and foreigners (i.e., net exports),
National Income and Product Accounts were invented as guides to government policy. Here are the sordid details:
http://www.bea.gov/national/pdf/nipaguid.pdf
http://www.bea.gov/scb/account_articles/general/0100od/maintext.htm
GDP is worthless as a measure of people’s well-being or even standard of living, i.e., the objective properties of set of goods they have. Obviously, then, it cannot be used to measure economic progress. At best, GDP is merely a measure of economic production.
Attempts have been made to modify GDP to make it more meaningful. Adjustments for changes in the purchasing power of money render Real GDP, which attempts to eliminate the impact of price inflation and price deflation. But, as Mises demonstrated, there is no objectively correct way to calculate a price index and therefore, such calculations will be manipulated for political reasons rendering them suspect for conducting economic analysis.
Austrians have constructed Private Product Remaining, which nets government activity out of GDP.
Even as a measure of economic production, GDP is, at best, misleading. by including only final goods, it ignores the vast majority of production in the economy which is the production of intermediate capital goods. Iron is mined and refined into steel which is formed into fenders which are assembled into cars. Only the production of cars is included in GDP. Production across the entire capital structure is left out. This omission leads to the fallacy that consumption is 70% of the economy. No, consumption is 70% of GDP, but a small fraction of the entire economy.