The Gross Domestic Product of a country. What does it mean, how is it calculated and is it important? I’ve never really gotten it
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To expand a little on what others have said:
It’s a measure of the “official” economic activity in the country. As phiwong said, it doesn’t do a very good job of representing illegal/black activity; in addition, it doesn’t measure lots of human activity that has economic value but isn’t transactional in a way that governments can track.
Childcare is a common example. The work of your kid’s daycare counts towards GDP – it’s one of the “services” in “goods and services.” But when you pick your kid up and take them home, the childcare you perform is *not* counted. Childcare has measurable economic value, since people are willing to pay for it. But not all of that value is calculated as part of GDP. Only the part that involves one person paying another is. (And even then, it’s only counted if the payment is reported to the government somehow – when you pay your friend’s daughter to babysit, that probably isn’t going into the GDP numbers either)
Is it important? By itself it can be kinda useful as a means to compare two countries. Having a higher GDP is generally desirable. It’s also important to look at GDP *per capita* – the total GDP split among all the people in a country. This gives you a better sense of wealth. If you just look at GDP, Luxembourg ranks #72 – a couple of spots below Guatemala. This might lead you to believe that Guatemala is wealthier than Luxembourg. It isn’t. Guatemala’s GDP is higher, but there are a lot more Guatemalans than Luxembourgers, so that GDP gets spread a lot thinner. Luxembourg ranks #1 in GDP per capita and is considered extremely wealthy; Guatemala ranks #109 and is considered one of the poorer countries in the Western Hemisphere.
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