GDP

GDP



GDP

What is GDP?

GDP is a way of quantifying the amount of activity in, and thus the size of, an economy. It is therefore a way of assessing the total worth of an economy and thus its total output. This is particularly relevant for assessing how an economy is growing (or contracting over time) and thus GDP measurements over a number of years can be very useful for assessing an economy's performance over that period, particularly in terms of the level of economic growth that it has experienced. It can also be used to compare the relative sizes of different economies, and it can be used to compare the relative economic performance therefore of different countries; especially when it is down-scaled to take account of a country's total population (GDP per capita) to give a fair comparison between countries.

The best way to understand the U.S. economy is by looking at Gross Domestic Product (GDP), which is the statistic used to measure the economy. In other words, the U.S. economy, as measured by GDP, is everything produced by all the people and all the companies in the U.S. (Wessels 2000)

By using GDP as an indicator of the size of a country's economy (and by using GDP per capita as an indication of relative wealth of a country) one can see several important things: by measuring the GDP of a country over a number of years one can assess its relative economic performance over the period; very important for government who wish to assess how their economy is performing relative to the rest of the world: they want their economy to perform well to maintain and raise their standard of living. It can how different countries are faring in the economic climate and can be used to judge any regional or global changes in economic activity, useful for monitoring events like the Great depression. One can also see that economies tend to be cyclical: they tend to have periods of economic growth, a recovery with a boom at the top, and they tend to follow that into a recession and eventually a slump in the long-term. Nearly every economy follows such a cycle, and often they follow it together as each country's economy is interlinked for a number of reasons. (Louis 2007)

Which are the main components?

The components of GDP (Gross Domestic Product) will tell you what the U.S. is good at producing. Over 70% of what the U.S. produces is for personal consumption. The remaining 30% of GDP is business investment (16%) and government (19%), of which one-third is defense. The largest components of personal consumption include: (Lipsey & Chrystal 2007)

More than 40% of GDP are services. The two largest components are real estate (10%) and health care (12%).

Non-durable goods are 20% of GDP. The three largest components are food (10%), clothing (2.7%) and fuel (2.4%).

Durable goods, such as autos (3.6%) and furniture (3%) is the smallest, at only 8% of GDP. (Balke and Robert 2003)

Which one is the between nominal and ...