GDP is one of the most important numbers in economics, and it’s followed by investors, policymakers and business leaders around the world. It can tell you a lot about a nation’s economy at a glance, and when compared to past data it can show trends over time.

But a single number can only convey so much information, and GDP isn’t perfect. One major flaw is that it only measures market activity, meaning that it excludes non-market activities such as under-the-table transactions or the informal economy. GDP also doesn’t take into account the value of volunteer or unremunerated work, like gardening for a neighbor or sewing clothes for charity. Another problem is that it doesn’t adjust for quality improvements or new products, so that a computer made today may be more expensive than an identical model produced in the past.

The biggest component of GDP is consumption, which includes any purchases by citizens including items such as food, jewelry, rent and gasoline. Professionals often view a steady increase in consumption as a sign of a healthy economy. Another large part of GDP is investment, which covers expenditures by companies investing in equipment, inventory and buildings for future production. If a country’s exports (X) are greater than its imports (M), it is running a trade surplus.

The White House, Congress and the Federal Reserve all use GDP numbers when making decisions about spending and tax policy. And business people rely on GDP to decide whether to expand into a new market or invest in a existing one.