GDP in 60 seconds or less
Any conversation at any get together you attend this weekend is bound to include talk of our miserable economy. The latest “woe is us” news involves a 6.2% drop in GDP for the fourth quarter of 2008. Throw that number out there and include that it’s the worst quarterly decline for the U.S. economy since the first quarter of 1982 (Source: WSJ.com). You will thoroughly depress people, but at least they’ll think you’re smart. Now you need to know what GDP is all about.
GDP = Gross Domestic Product
“The gross domestic product (GDP) is one the primary indicators used to gauge the health of a country’s economy. It represents the total dollar value of all goods and services produced over a specific time period – you can think of it as the size of the economy.” (Source: Investopedia.com)
Check out the links below for more information including formulas, diagrams, etc., but at its core, GDP is a common-sense approach to gauging the economy. When we make less (increased unemployment, salary decreases, etc.), we spend less. With fewer employers and less demand for goods, we produce less, we export less, and are purchasing more goods as imports in a relative sense. These items decrease a country’s GDP and “slow down” the economy.
Read on:
WSJ.com – GDP Shrank 6.2% in 4th Quarter, Deeper Than First Thought
Investopedia.com – What is GDP and why is it so important?
MindTools.net – Calculating GDP
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