Final answer:
Gross Domestic Product (GDP) is the total value of all goods and services produced by a nation within a given year, calculated by summing the product of quantities and prices of goods and services. Option 2 is correct.
Step-by-step explanation:
Gross Domestic Product (GDP) is a measure of the economic performance of a nation. Specifically, the question asks what GDP is. The correct answer is option 2): GDP is a measure of all the goods and services produced by a nation in a given year.
Economists calculate this figure by multiplying the quantities of all goods and services produced by their respective prices and summing the total. It encompasses the total value of all goods and services produced over a specific time period within a country's borders. As such, it captures the size of national economic activity.
GDP as a measure does not subtract government spending, divide by government spending, or divide by the population—that latter measure is referred to as GDP per capita. Thus, the inclusion of government spending in the calculation of GDP relates to its role in the economy as a consumer and investor, not as a deductive or divisive factor.