How is gdp interpreted

As women are now in the labor force, many of the services they used to produce in the non-market economy like food preparation and child care have shifted to some extent into the market economy, which makes the GDP appear larger even if more services are not actually being consumed. GDP has nothing to say about the level of inequality in society. GDP per capita is only an average. GDP also has nothing in particular to say about the amount of variety available. If a family buys loaves of bread in a year, GDP does not care whether they are all white bread, or whether the family can choose from wheat, rye, pumpernickel, and many others—it just looks at whether the total amount spent on bread is the same.

Likewise, GDP has nothing much to say about what technology and products are available. The standard of living in, for example, or was not affected only by how much money people had—it was also affected by what they could buy.

No matter how much money you had in , you could not buy an iPhone or a personal computer. In certain cases, it is not clear that a rise in GDP is even a good thing. If a city is wrecked by a hurricane, and then experiences a surge of rebuilding construction activity, it would be peculiar to claim that the hurricane was therefore economically beneficial. If people are led by a rising fear of crime, to pay for installation of bars and burglar alarms on all their windows, it is hard to believe that this increase in GDP has made them better off.

Improve this page Learn More. Skip to main content. Personal Finance. Your Practice. Popular Courses. Part Of. Introduction to Economics. Economic Concepts and Theories. Economic Indicators. Real World Economies. Economy Economics. Table of Contents Expand. Nominal vs. Real GDP. Measuring GDP. GDP for Economists and Investors. The Bottom Line. Key Takeaways Gross domestic product tracks the health of a country's economy.

It represents the value of all goods and services produced over a specific time period within a country's borders. Economists can use GDP to determine whether an economy is growing or experiencing a recession. Investors can use GDP to make investments decisions—a bad economy means lower earnings and lower stock prices. Article Sources. Investopedia requires writers to use primary sources to support their work.

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