Speaker 1: Welcome to brain Stuff from How Stuff Works. Hey, brain Stuff,
Speaker 1: it's Christian Seger. Okay, let's say you've just gotten a job.
Speaker 1: Offer to work in the majestic country of bum Sylvania. Awesome, right,
Speaker 1: You've always wanted to live amongst the scenic bum Sylvanian
Speaker 1: swamp lands, and here the local ghost toads sing their
Speaker 1: famous mating screech. But before you pony up the five
Speaker 1: forty nine cents for Rosetta Stone bump Sylvanian Edition, you
Speaker 1: want to do a little research on the economic health
Speaker 1: of this country. So you ask your friend, the economics professor, Hey,
Speaker 1: how is the economy of bum Sylvania doing these days? Well,
Speaker 1: one number that will almost definitely figure into her reply
Speaker 1: is the country's g d P. This stands for gross
Speaker 1: domestic product. G d P is a common measure that's
Speaker 1: used to roughly represent the size of a country's economy.
Speaker 1: The way you calculate g d P is both simple
Speaker 1: as a general principle and complicated in the details. The
Speaker 1: simple version is that GDP is the value of all
Speaker 1: the goods and services produced within a country in a
Speaker 1: given period of time, such as a financial quarter or
Speaker 1: a year. So if we look at bum Sylvania, we
Speaker 1: can calculate its yearly GDP by adding up the dollar
Speaker 1: value of all the stuff it creates, all the pork sandwiches,
Speaker 1: shoe shines, fashion magazines, bullets, massages, motorcycles, jiu jitsu classes,
Speaker 1: ghost toad swamp tours, and of course, traditional Bumpsylvanian style
Speaker 1: wooden hats. Every item, product, or service brought to market
Speaker 1: by workers or other economic resources located inside the country
Speaker 1: in that year is part of the g d P.
Speaker 1: Of course, coming up with this figure is not as
Speaker 1: easy as it sounds. GDP is actually a highly complex
Speaker 1: and abstract statistical instrument that takes some real work to calculate.
Speaker 1: Just one example of the many complications. Let's say somebody
Speaker 1: cuts down some swamp trees and turns those trees into lumber,
Speaker 1: and then sells that lumber to a haberdasher who turns
Speaker 1: it into a traditional bump Sylvanian style wooden hat. Do
Speaker 1: you count the sales of both the lumber and the hat? Well, no,
Speaker 1: because g d P is a measure of the final
Speaker 1: value of goods and services. So if you counted the
Speaker 1: sale of the wood to the hat maker and the
Speaker 1: sale of the hat, you'd be counting the same value
Speaker 1: twice the value of the wood gets wrapped into the
Speaker 1: final value of that gorgeous, gorgeous head CEAR. G d
Speaker 1: P is probably the most important measure of the size
Speaker 1: and performance of an economy, but it's not the only one.
Speaker 1: There's also g n P, which is related but slightly different.
Speaker 1: G n P stands for gross national product. G d
Speaker 1: P is the value of all economic production inside a
Speaker 1: country's borders, no matter who is doing that production. G
Speaker 1: n P, on the other hand, is the value of
Speaker 1: all the products and services produced by a country's residence,
Speaker 1: even if production takes place outside the country. So if
Speaker 1: a bump Sylvanian business has a factory making wooden hats
Speaker 1: in another country, the output of that factory would be
Speaker 1: included in bump Sylvania's g n P, but not it's
Speaker 1: g d P. Both figures are economically useful, but according
Speaker 1: to the U S Bureau of Economic Analysis, g d
Speaker 1: P is the primary measure used by the United States
Speaker 1: and most other countries. While g d P is a
Speaker 1: widely used indicator of economic strength, many critics point out
Speaker 1: that it's not necessarily the best indicator of the real
Speaker 1: health of a nation. For example, a country with a
Speaker 1: large growing g d P might look strong on paper,
Speaker 1: but what if that number is masking vast income inequality
Speaker 1: a productive economy based on huge amounts of, say, low
Speaker 1: wage labor. Of course, by comparing g d P with
Speaker 1: other pieces of data, you can do more with the figure.
Speaker 1: A simple example would be comparing g d P with
Speaker 1: population to come up with per capita GDP, which means
Speaker 1: economic value per person. So, for example, according to the
Speaker 1: World Bank in tween, China's GDP was a massive nine
Speaker 1: point two trillion dollars. Compare that to Luxembourg's relatively small
Speaker 1: g d P of sixty billion dollars. Yet in the
Speaker 1: same year, China's GDP per capita was only about six thousand,
Speaker 1: eight hundred dollars, while Luxembourg's was more than sixteen times
Speaker 1: that at about one hundred and ten thousand dollars. So,
Speaker 1: while China's a economy is certainly much larger, it looks
Speaker 1: like each individual citizen on average is better off in Luxembourg.
Speaker 1: Financially speaking. Methods check out the brain stuff channel on YouTube,
Speaker 1: and for more on this and thousands of other topics,
Speaker 1: visit how stuff works dot com.