Every country has a GDP. The US GDP in 2007 was $13.8 trillion.
Some nations are quite wealthy, per capita. Others are quite poor.
We want to see a steady increase in the GDP. For a mature nation like ours, a 3% annual increase is nice. When we see it decline, especially for two successive calendar quarters, we call it a "recession."
A healthy GDP helps answer the questions:
- Will I have a job?
- Can I afford to buy things?
- Will I earn money on my investments?
- Can I afford to retire?
So just what is a "GDP?" It is the total cost of all finished goods and services produced.
Let's picture what this is. GDP is the sum of four items:
1. Personal consumption. This is what we spend on food, rent, medical expenses and so on.
2. Business and household capital purchases. Examples for businesses include construction of a new mine, purchase of software, or purchase of machinery and equipment for a factory. For individuals, this would be for new houses.
3. Government spending. This includes salaries of public servants and purchase of weapons for the military. It does not include social security or unemployment benefits.
4. Exports to other nations, less what we import.
GDP per capita is often used as an indicator of standard of living in an economy, the rationale being that all citizens benefit from their country's increased economic production.
As such, it is a very broad measure...and as you can see, throughout the Middle Ages, poverty was the norm. In the recent decades, people in North America and Europe have become quite wealthy.
As we ponder the future, China and India, for example, may catch up to our standard of living.
Still, there is likely to be billions of people who live impoverished lives.
I guess when can be thankful--even the poorest in the US are relatively well off. And we should give thought to economic development & humanitarian efforts to help those in the world who are not as fortunate.
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