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Definition
Gross Domestic Product (GDP) is the market value of all goods and services produced by a nation in a given year. It is calculated by adding all spending (government, consumer, and investment) and exports and subtracting the value of imports. For GDP to have any real value as a statistic, it has to be adjusted for inflation. (If GDP grows 5% one year, but inflation is also 5%, no real growth has taken place.)
Usage
GDP is the statistic used by economists to determine if the economy is growing from year to year. Two consecutive quarters of negative GDP growth is called a recession.
GDP per capita (a country's GDP divided by the population of the country) is often used to determine a nation's standard of living, but there are limitations. There are items that GDP does not take into account, such as income inequality, black market transactions and bartering. All of these provide value and could either increase or reduce an individuals standard of living, but they cannot be measured.
The United States
According to the CIA The World Factbook, the United States ranked 10th in the world by the measurement of per capita GDP in 2008. Most of the countries ahead of the United States are small, rich countries such as Liechtenstein and Qatar. The United States ranks well ahead of all their so-called western neighbors such as the European Union and Canada.
According to the CIA The World Factbook, the United States ranked 10th in the world by the measurement of per capita GDP in 2008. Most of the countries ahead of the United States are small, rich countries such as Liechtenstein and Qatar. The United States ranks well ahead of all their so-called western neighbors such as the European Union and Canada.
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