Global GDP

GDP is a statistic often used to compare economic performance of different countries. It is the accumulated value of all finished goods and services produced in a country over a specific time period. It is calculated by adding up all the market transactions that take place in a country, including consumer spending (C), investment (I), government expenditures (G) and net exports.

Consumption is the largest component of GDP, indicating how much people in a country are spending on goods and services. C includes all the personal consumption in an economy, from buying food to paying for medical expenses. Investment, on the other hand, is money that businesses put into their own operations. It can be done through a variety of ways, such as purchasing machinery or building new buildings. However, some investments are not counted in GDP because they are not considered to be purchases of products. For example, purchasing bonds or companies’ shares represents a transfer of ownership deeds rather than a direct purchase of products.

In addition, GDP does not consider non-market activities such as under-the-table activity or unrecorded volunteer work. Furthermore, it fails to take into account the environmental cost of production and does not measure citizens’ quality of life. For example, traffic jams may increase GDP because they lead to a greater consumption of gasoline, but they decrease citizens’ quality of life due to pollution.

Global GDP is expected to slow down this year because of rising trade barriers and heightened policy uncertainty. To get back on track, a reset is needed that includes renewed global cooperation and restored fiscal responsibility.