A primer on the U.S. gross domestic product

A couple of weeks ago, I wrote about the U.S. federal budget. You can find the blog entry here.

Several people mentioned that they found it helpful to have some basic information about the federal government’s yearly income (about $2.57 trillion), expenditures (about $3.83 trillion) and deficit (about $1.27 trillion). Today I’m offering some information about a related topic, the gross domestic product.

Simply put, the GDP is the market value of all final goods and services produced within a country in a given period of time. In 2010, the U.S. GDP reached more than $14.6 trillion. The European Union collectively reached $15.9 trillion, but no single country came anywhere near us. China was our closest competitor with a GDP of $5.7 trillion. To see how other nations fared, go here.

I’ve taken a look at how the U.S. GDP has grown over the past 50 years. In 1960, our GDP was a little more than $525 billion (or about $2.8 trillion adjusted for inflation compared with 2005 dollars). This link – gross domestic product history – will take you to a spreadsheet I developed to see the major inputs into GDP over the past 50 years. The source of the data is the U.S. Bureau of Economic Analysis, a branch of the Commerce Department. To see the inflation-adjusted figures, go here.

One thing you’ll see immediately is that consumerism has been driving our economy for a long time. In 1960, personal consumption of goods and services accounted for about 63 percent of GDP. In 2010, the figure stood at 70 percent. Now that we’re all wary of consuming beyond our means, it will be interesting to see how the GDP will be affected.

You also should know that our national debt stands at about $14 trillion, or just a bit less than one year of our GDP. The interest on the debt stands at about $251 billion a year.

Why should you care about all this? As I said in my post about the federal budget, it’s important for citizens in a democratic society to be rooted in fact. The more you understand about how we make and spend our money, the better input you can give your representatives about how you want to see it spent. If you learn a little about these things, you won’t be a nerd; you’ll just be a better-informed citizen and a more intelligent voter.

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4 Responses to A primer on the U.S. gross domestic product

  1. Cole Lannum says:

    A couple of “must see” videos to understand the enormity of the problem and the magnitude of big numbers…

    http://www.wimp.com/budgetcuts/

    http://www.youtube.com/watch?v=caMRBGmja3w

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