posted on Oct, 19 2008 @ 09:36 AM
GDP measures the physical amount of goods and services produced in an economy over a given period of time. The value of this output has to be
expressed in a particular unit of currency.
Suppose the US's GDP in 2006 was $100bn (measured in end-2006 prices), and in 2007 was $105bn (measured in end-2007 prices). If inflation had been
running at 5% during 2007, then in real terms the US has not physically produced any more goods and services in 2007 than in 2006 - what appears to be
a 5% rise can be accounted for solely in the fact that that prices, not actual output, are now 5% higher.
A 3% rise in GDP means that actual output (i.e. stripped of the effect of inflation) is 3% higher. Here in the UK, a recession is defined as 2
consecutive quarters where actual output has fallen. I don't know if the same definition is used in the US.
A fall in the value of the dollar means that it will buy fewer yen, euros, pounds etc. than it previously did, but it has no direct impact on the
calculation of GDP. Maybe where you have "gone wrong" is in mixing up GDP and the effect of a fall in the external value of the dollar, which is
quite easy to do.
I hope this goes some way towards answering your question.