Eli5 If a nation’s GDP is essentially simply how much businesses are charging for products and services, then why is it such a closely followed metric?

Question

Is it simply a matter of, “This is how much money consumers can spend”? Because if so, that seems arbitrary to me, given the fact that it’s the business giving the money to the consumers to begin with.

In: 5

Answer 1

GDP by itself isn’t useful because it needs to be adjusted for inflation and per Capita.

GDP adjusted for inflation and per Capita is a good measure of how big the pie is to be split amongst a nations people. Bigger pie = more prosperity to share around.