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Speaker 1: Welcome to brain Stuff production of iHeart Radio. Hey brain Stuff,

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Speaker 1: Lauren voke obam here with a classic episode from our

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Speaker 1: earthWhile host Christian Sagar. This one breaks down some very basic,

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Speaker 1: yet very complex economic terms for you, g d P

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Speaker 1: and g n P. Hey brain Stuff, it's Christian Sagar. Okay.

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Speaker 1: Let's say you've just gotten a job offer to work

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Speaker 1: in the majestic country of bum Sylvania. Awesome, right, You've

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Speaker 1: always wanted to live amongst the scenic bum Sylvanian swamp lands,

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Speaker 1: and here the local ghost toads sing their famous mating screech.

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Speaker 1: But before you pony up the five forty nine cents

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Speaker 1: for Rosetta Stone Bumpsylvanian edition, you want to do a

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Speaker 1: little research on the economic health of this country. So

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Speaker 1: you ask your friend, the economics professor, Hey, how is

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Speaker 1: the economy of bum Sylvania doing these days? Well, one

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Speaker 1: number that will almost definitely figure into her apply is

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Speaker 1: the country's g d P. This stands for gross domestic product.

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Speaker 1: G d P is a common measure that's used to

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Speaker 1: roughly represent the size of a country's economy. The way

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Speaker 1: you calculate GDP is both simple as a general principle

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Speaker 1: and complicated in the details. The simple version is that

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Speaker 1: GDP is the value of all the goods and services

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Speaker 1: produced within a country in a given period of time,

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Speaker 1: such as a financial quarter or a year. So if

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Speaker 1: we look at bump Sylvania, we can calculate its yearly

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Speaker 1: GDP by adding up the dollar value of all the

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Speaker 1: stuff it creates, all the pork, sandwiches, shoe shines, fashion magazines, bullets, massages, motorcycles,

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Speaker 1: jiu jitsu classes, ghost toad swamp tours, and of course,

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Speaker 1: traditional bump Sylvanian style wooden hats. Every item, product or

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Speaker 1: service brought to market by workers or other economic resources

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Speaker 1: located inside the country in that year is part of

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Speaker 1: the g d P. Of course, coming up with this

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Speaker 1: figure is not as easy as it sounds. GDP is

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Speaker 1: actually a highly complex and abstract statistical instrument that takes

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Speaker 1: some real work to calculate. Just one example of the

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Speaker 1: many complications. Let's say somebody cuts down some swamp trees

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Speaker 1: and turns those trees into lumber, and then sells that

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Speaker 1: lumber to a haberdasher who turns it into a traditional

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Speaker 1: bump Sylvanian style wooden hat. Do you count the sales

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Speaker 1: of both the lumber and the hat. Well, no, because

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Speaker 1: g d P is a measure of the final value

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Speaker 1: of goods and services. So if you counted the sale

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Speaker 1: of the wood to the hat maker and the sale

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Speaker 1: of the hat, you'd be counting the same value twice.

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Speaker 1: The value of the wood gets wrapped into the final

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Speaker 1: value of that gorgeous, gorgeous head cear. GDP is probably

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Speaker 1: the most most important measure of the size and performance

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Speaker 1: of an economy, but it's not the only one. There's

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Speaker 1: also g n P, which is related but slightly different.

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Speaker 1: G n P stands for gross national product. G d

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Speaker 1: P is the value of all economic production inside a

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Speaker 1: country's borders, no matter who is doing that production. G

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Speaker 1: n P, on the other hand, is the value of

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Speaker 1: all the products and services produced by a country's residence,

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Speaker 1: even if production takes place outside the country. So if

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Speaker 1: a bump Sylvanian business has a factory making wooden hats

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Speaker 1: in another country, the output of that factory would be

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Speaker 1: included in Bumpsylvania's g n P, but not it's g

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Speaker 1: d P. Both figures are economically useful, but according to

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Speaker 1: the U. S Bureau of Economic Analysis, g d P

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Speaker 1: is the primary measure used by the United States and

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Speaker 1: most other countries. While GDP is a widely used indicator

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Speaker 1: of economic strength, many critics point out that it's not

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Speaker 1: necessarily the best indicator of the real health of a nation.

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Speaker 1: For example, a country with a large, growing GDP might

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Speaker 1: look strong on paper, but what if that number is

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Speaker 1: masking vast income, inequality and productive economy based on huge

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Speaker 1: amounts of, say, low wage labor. Of course, by comparing

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Speaker 1: g d P with other pieces of data, you can

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Speaker 1: do more with the figure. A simple example would be

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Speaker 1: comparing g d P with population to come up with

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Speaker 1: per capita g d P, which means economic value per person. So,

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Speaker 1: for example, according to the World Bank, in China's GDP

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Speaker 1: was a massive nine point to trillion dollars. Compare that

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Speaker 1: to Luxembourg's relatively small g d P of sixty billion dollars.

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Speaker 1: Yet in the same year, China's GDP per capita was

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Speaker 1: only about six thousand, eight hundred dollars, while Luxembourg's was

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Speaker 1: more than sixteen times that at about one hundred and

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Speaker 1: ten thousand dollars. So, while China's economy is certainly much larger,

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Speaker 1: it looks like each individual citizen on average is better

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Speaker 1: off in Luxembourg. Financially speaking, that is. Today's episode was

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Speaker 1: written by Joe McCormick and produced by Tyler Klang. To

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Speaker 1: hear more from Joe, chat at his podcasts Stuff to

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Speaker 1: Blow Your Mind and Invention and for more on this

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Speaker 1: and lots of other topics because at how stuff works

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Speaker 1: dot com. Brain Stuff is production of iHeart Radio. For

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