RS5: GDP and its Real Significance on Society

RS5: GDP and its Real Significance on Society

            Even though we should know how rich our country is compared to others, there is no way to find out the definite answer.  However, GDP is one way to somewhat solve that problem.  GDP stands for gross domestic profit, which is the total profit that a country brings in during a year.  Although GDP is not exact, it paints us a brief picture of how our country is doing economically.  Currently the United States leads all other countries with a GDP of 15.09 trillion dollars. 

            GDP is any product or service that a country produces that creates profit for it.  For example, Mary wants to hire a cleaning lady.  Once she hires that cleaning lady she is contributing to the US GDP.  However, if Mary ends up cleaning her house herself, she is not contributing to GDP.  GDP has a select few rules: it must be a new product, has to be made in the country, and cannot be counted multiple times.  If a ball is made in China, most of the profit will contribute to China’s GDP, but the profit that the store makes from selling that ball will go to the US GDP.  Also, if person buys a box of popcorn, the GDP is only counted once at the final purchase.  The company who buys the corn from the farmer does not contribute to the GDP, only the consumer does.

            In the United States, there are many things that contribute to the GDP.  Manufacturing contributes to 12% of the country’s GDP, and health care contributes to another 16%.  However the biggest contributor is real estate.  When you drive past a construction site that is building a new housing complex, each one of those houses will end up contributing to the countries GDP.  With the constant increase in our population and the need for more building, real estate is the one factor that keeps our GDP so high.  The only limitation here is that old houses do not contribute as much.  For example, when my parents bought my house they were not contributing the GDP in 1996 because the house was not brand new and was made in a different year.  However, there is such thing as imputed rent that does contribute to the GDP.  Imputed rent is a monetary “rent” amount that the government places on your house as if you were paying rent.  So if the government said that my house was worth $3,000 dollars in rent every month, $36,000 of imputed rent would contribute to the GDP for the year. 

            The gross domestic profit of a country is only a brief look at how the country is doing economically.  Although it gives us a figure of the profits the country is bringing in, it is not an exact or perfect way to examine the countries economic standing.  Currently the United States leads any other country with the highest GDP of 15.09 trillion dollars, but that does not mean that Americans are better off than other people.  GDP is just a glance at what the country is bringing in during the year, and is not the whole picture.  Even though it would be great to have a definite number, there is no way to figure it out when a countries economy is so large and complex.  

WHAT IS GDP?!?