Economists study economic performance using national income accounting, a system of collecting statistics on the economy. The U.S. Department of Commerce collects this data in the form of National Income and Products Accounts (NIPA). The most important NIPA measure is gross domestic product (GDP), the dollar value of all final goods and services produced in a country's borders in a given year. GDP does not include intermediate goods, goods used to produce final goods. For example, the price of a new house that is sold is included in GDP, but not the nails and lumber used to build that house. GDP includes goods produced in the country by a foreign company, but not goods that an American company produces in another country.

     Changing prices can distort GDP. To correct this, economists determine real GDP, GDP expressed in constant, or unchanging, prices.

     Another important NIPA measure is gross national product (GNP). GNP includes income earned by U.S. companies outside of the country, but does not include the income earned by foreign firms doing business in the country.

     As you might expect, supply and demand affect GDP. Economists calculate the price level, the average of all prices, to determine aggregate supply, the total amount of goods and services in the economy available at all possible price levels. Aggregate demand is the amount of goods and services in the economy that will be purchased at all possible price levels. The intersection of aggregate supply and aggregate demand on a graph indicates the equilibrium price level of the economy.