Tuesday, March 29, 2005

The Gross Domestic Product

Gross Domestic Product (GDP) is defined as the market value of all final goods and services produced within a country in a given period of time.

"GDP does not allow for the health of our children, the quality of their education, or the joy of their play. It does not include the beauty of our poetry, or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our courage, nor our wisdom, nor our devotion to country. It measures everything, in short, except that which makes life worthwhile, and it can tell us everything about America except why we are proud that we are Americans."
--Robert F. Kennedy (1968)


In Economics class, which I am teaching for the first time, we have just started our section on Macroeconomics and the first thing we study is how do we measure the health of our economy. It's the GDP. Think of GDP as a pie. For the US to continue to experience the high standard of living, we must grow our GDP at a rate of 2% a year. Or, we have to continue increasing the size of the pie. So the question came up today in class, but what if the quality of the pie isn't as good as it used to be? Food for thought!

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