GDP or Gross Domestic Product is slot one of the most important ways of showing how well, or badly, an economy is doing. It's a measure - or an attempt to measure - all the activity of companies, governments and individuals in an economy. GDP allows businesses to judge when to expand and hire more people, and for government to work out how much to tax and spend. What is GDP? In the UK, new GDP figures are produced every month, but the quarterly figures - covering three months at a time - are the most widely watched. In a growing economy, quarterly GDP will be slightly bigger than the quarter before, a sign that people are doing more work and getting (on average) a little bit richer. Most economists, politicians and businesses like to see GDP rising steadily. Rising GDP means more jobs are likely to be created, and workers are more likely to get better pay rises. If GDP is falling, then the economy is shrinking - bad news for businesses and workers. If GDP falls for two quarters in a row, that is known as a recession, which can mean pay freezes and lost jobs. How does GDP affect me? If GDP is growing, the government will use it as evidence to say that they are doing a good job of managing the economy. Likewise, if it falls, opposition politicians will say the government is running it badly. GDP helps government decide how much it can spend on public services and how much it needs to raise in taxes. If GDP is going up steadily, people will pay more tax simply because they're earning and spending more. This means more money for the government to spend on public services, such as schools, police and hospitals.