Unlock 2025’s Economy: 1 Simple Metric to Rule Them All

A lesson on GDP

(This post was previously published on Substack.)

To understand the economy, we need to understand its most important concept — GDP.

Gross Domestic Product (GDP) is the value of all finished or final goods and services produced domestically in a year.

GDP adds together all goods and services made in one country. [1]

There are four key words to pull out of the definition: value, final, produced, and domestic.

Value

Value in economics means the price.

To add everything together, we need to take into account different prices. If you’ve ever heard the phrase, “you can’t add apples and oranges,” then you know what I mean.

Apples and oranges can have different prices. There’s a seasonal difference in prices. Apples are more plentiful, and cheaper in the fall. Oranges have a seasonal window too. Winter. Oranges and other citrus are in season and cheaper. [2] The seasons matter in calculating GDP.

But most of us consume oranges as juice. And we can get that all year long. That is true of most goods. But goods can vary in terms of their value, or the price we’re willing to pay.