Tuesday, October 16, 2012

Keeping Score

What does real GDP growth mean for you and me?

Real GDP growth, for an average citizen, is having access to materials and advancements that are a direct result of our country's production. Though nominal GDP growth could be calculated by the amount the country has produced regardless of other factors, real GDP takes into consideration inflation and other changes in the "price level." However, these numbers do not take into consideration the amount destructed and amount ruined in order to make way for that production. For average citizens, real GDP is merely a number, a number that indicates what our country has produced. This number does not indicate the happiness of the country's citizens, does not let us know how much we personally are making, or if we personally are rich. This number is merely production, and though there is often correlation between production and education, or production and happiness, there are many situations where this is not true. Therefore, real GDP just lets us know how much our country is making, and is adjusted so that cow that may be worth $10 more today than last year, we actually know isn't necessarily worth more due to inflation.

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