What does gross domestic product mean? "Gross" signifies that no deduction has been made for the depreciation of machinery, buildings and other capital products used in production. "Domestic" means that it is production by the resident institutional units of the country. As many products are used to produce other products it is necessary to define production in terms of value added.
GDP can be measured in three different ways: as output less intermediate consumption (i.e. value added) plus taxes less subsidies on products (such as VAT); as the income earned from production by summing employee compensation, the gross operating surplus of enterprises and government, the gross mixed income of unincorporated enterprises and net taxes on production and imports (VAT, payroll tax, import duties, etc, less subsidies); or as the expenditure on the goods and services produced by summing final consumption expenditures, gross fixed capital formation, changes in inventories and exports less imports.