GDP stands for gross domestic product. The nominal GDP represents the amount of final goods and services produced in a year. It is composed of consumer spending, investment, government spending and net exports.
Calculate the total consumer spending by adding up all purchases of goods and services by households. These can include food, gas and clothing.
Calculate total investment. This includes all machines and construction including housing and factories.
Calculate total government spending. This includes all purchases of goods and salaries paid to government employees. Do not include transfer payments.
Calculate net exports. Subtract the value of goods produced elsewhere and imported from the amount of goods produced in the area and shipped elsewhere. This number is positive if exports are greater than imports, but will be negative if imports are greater than exports.
Add the totals for consumer spending, investment, government spending and net exports (if net exports is negative, subtract it). This is the nominal GDP.
Only include final products in the calculations. GDP avoids double counting by not including the value of unfinished goods or used goods that are being resold.
Nominal GDP does not take into account the inflation of prices over time, so even though it may increase, it does not guarantee the economy is growing.