The most common statistic used to measure the size and growth rate of a nation’s economy is Gross Domestic Product (GDP). However, GDP as most commonly used can be a flawed measurement if one tries to infer that the size or growth of economic activity is well correlated to the prosperity of its people. Consider China and the United States for example. The U. S. has a GDP of approximately $16.5 trillion and a population of roughly 325 million while China has a GDP of nearly $11 trillion and a population of approximately 1.4 billion. One could say that China’s economy is about two-thirds the size of the U. S. economy, however when one considers how that activity is spread amongst the citizens, China’s economy is only one-seventh that of the U. S. Accordingly, Chinese citizens are clearly less productive and prosperous than U. S. citizens
GDP per capita (per citizen), as demonstrated above, is a valid way to measure the efficiency of one nation’s economic output versus another and is also an important statistic to gauge the productivity and prosperity trends in one country.
This post was published at Wall Street Examiner by 720global ‘ September 7, 2016.