Does a countries GDP end up ultimately being distributed to individuals by salaries, shares, purchases and other assets?
In: Economics
GDP stands for Gross Domestic Product. It’s suppose to be a measure of all the economic transaction in a country economy. This is a useful measure because it relates to a concept call the velocity of money. Money is either spent or hoarded. Each time money is exchanged for a good or service, some portion of that money is given to the people employed to produce that good or provide that service, or their management, and they then go on to use that money purchase more goods & services, repeating the cycling until someone decides not to spend it, hoarding it in some from. The more times the money exchanges hands before it is hoarded, the higher it’s velocity is. Economists and governments care about this because when the velocity of money goes down, it’s means that people are decided to hoard money more than they are spending it, and this is one of the things that will trigger a recession. Since GDP is a measure of the total amount of transactions within a country, examining how it changes can tell people when a recession is coming.
It’s not the case that the GDP is distributed to individuals, but rather that GDP is suppose to a measure of their actions.
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