How does the government measure GDP and how the actions of small
businesses affect GDP?

Dear mojito74,

The U.S. government's Bureau of Economic Analysis computes the GDP
using chain-type annual-weighted indices. Each chained index measures
a certain component of the output, and the sum of the chained indices
is the total GDP. Chained indices are more accurate than the
fixed-weight indices used through the end of 1995 because they
incorporate the effects of price changes in the output component over
time, rather than using only the current prices of the time period in
question.

The same two-step process is applied to each component of the GDP.
First, the value of the component is estimated in current dollars;
second, the current-dollar value is separated into two elements, one
describing the price change and the other describing the quantity
change. The second step is necessary for technical purposes so as to
compute the chained weighting for that index. The current-dollar
estimates of the first step are tallied using various sources of data,
such as retail-sales figures collected by the Census Bureau.

Preview of the Comprehensive Revision of the National Income and
Product Accounts: BEA's New Featured Measures of Output and Prices
http://www.bea.gov/bea/ARTICLES/NATIONAL/NIPA/1995/0795od.pdf

The Census Bureau does not itself distinguish between small and large
businesses. Furthermore, it does not collect statistics from
unincorporated businesses that have no payroll, in other words,
self-employed individuals with no employees. If a small business does
have a payroll, it contributes in several ways to the retail-sales
figures of the Census Bureau and to other components of the GDP. Small
businesses contribute directly to the GDP by making investment
expenditures, by exporting goods that they produce, and by importing
goods that they need. They also contribute indirectly by attracting
government expenditure and by causing consumers to buy their products.
According to the House of Representatives' Small Business Committee,
the government strives to spend 23 percent of its procurement budget,
or almost a quarter, on small business.

U.S. Census Bureau: Statistics About Business Size
http://www.census.gov/epcd/www/smallbus.html

House of Representatives: Small Business Committee
http://wwwc.house.gov/smbiz/smallBusinessFacts/smallBusinessFacts.asp

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Regards,

leapinglizard


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Great answer, fast and lots of details, thank you!, hope to keep working with you!