Final answer:
GDP is defined as the value of all final goods and services produced in a nation's economy over a year, avoiding any double counting of items at different production stages. It equates to the nation's total income and is calculated by summing all spending on final goods and services.
Step-by-step explanation:
The best definition of GDP (Gross Domestic Product) is the value of all final goods and services produced within a nation's borders in a given year. Final goods are those which have reached the end of the production process and will not be transformed into another good. It's essential to avoid double counting in GDP calculations, ensuring that the value of items produced is only counted once, rather than multiple times across various stages of production. For example, if statisticians included the value of tires and then later included them again when they count the value of the truck that the tires are on, the tires' value would be double-counted, which is incorrect since the truck's price already reflects the tires' value.
Consequently, the value of a nation's output is equal to the total value of a nation's income. Thus, GDP can also be viewed as a measure of national income. Calculating GDP involves counting all the spending on these final goods and services over a year, and this total spending reflects the income earned by those contributing resources to the economy.