Dylan’s Domain: GDP

November 4, 2020

Real GDP increased at an annual rate of 33.1% in the 3rd quarter of 2020. The increase reflected increases in personal consumption expenditures, exports, nonresidential fixed investment, residential fixed investment. This increase was partly offset by decreases in federal government spending and state and local government spending.

Gross Domestic Product measures the value of all final goods and services produced in a country in a given period. This measure includes all private and public consumption, government outlays, investments, private inventories, paid-in construction costs, and foreign balance of trade.

GDP is broken down into two sections, real and nominal. Nominal GDP does not account for inflation or deflation, usually resulting in a higher GDP number. Nominal GDP is used when comparing different quarters of output within the same year. Real GDP is calculated using the GDP price deflator, which is the difference in prices between the current year and the base year.

Another measurement of gross production in a country is Gross National Product. GNP differs in that it is a measurement of the production levels of any American-owned business, regardless of where the actual production is taking place.

GDP is important because it is the most common indicator of the economic health of a country, as well as a gauge of a country’s standard of living. GDP is also used to compare the productivity of various countries. Economists use GDP to keep track of a country’s economy. A decrease in GDP indicates a recession, and an increase indicates an economic expansion.

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