Gross Domestic Product (GDP) is an important economic indicator compiled by many countries and territories to show their overall economic situation. GDP is an aggregate of the total value of net output (including goods and services) produced by a country within specific period. It does not refer to 'gross output' such as a factory's sales figures. We cannot get a meaningful figure on the total production of an economy by simply adding up all the sales figures. If we did there would be a lot of double counting. For example, the sales figures of garment factories include the value of cloth which would duplicate the sales values of the weaving factories. To eliminate double counting, GDP is derived by summing up only the value of goods and services that a goods-producer or service-producer has added to what has already been produced or 'value added'. A garment factory, for example, would add value on the raw materials (and other supplies, electricity, water and various purchased services used) when produces its output (garments). The method of summing up the value added of all goods-producers or service-producers to derive GDP is called the production approach. Another method of deriving GDP is the expenditure approach. This is to add up the economy's total expenditure on goods and services for final use. We must not include those goods and services (imported contents) used for intermediate consumption, otherwise double-counting will result. To remove the imported contents, we have to deduct from the total value of the final goods and services the value of goods and services imported. Removing the imported contents is necessary because GDP covers only output produced within the geographic boundary of the economy. Over any period of time, changes in GDP reflect changes in both the quantity and the price of goods and services produced. To measure the growth of an economy in real terms, the effect of price changes has to be eliminated. This can be done by re-valuing GDP for various periods of time to those at a given period. In so doing, we obtain 'GDP at constant prices'. Last year, Hong Kong's GDP at current prices was $1,333 billion. When measured at constant (1990) prices, the GDP in 1997 was $836 billion. This figure is higher by 5.3 per cent than that for 1996. The media would then report that 'the Hong Kong economy grew by 5.3 per cent in real terms'. For more information on this series of articles, please write to the General Statistics Branch (2) of the Census & Statistics Department at Wanchai Tower, 12 Harbour Road, Wan Chai, Hong Kong, or call 2582 4732.