Why Is GDP so Important?

GDP is important because it is a leading indicator of a country’s economic health. It gives economists an idea of the nation’s financial viability.

The GDP calculates the economic value of all produced goods and services generated by the country. The exact calculation is rather complicated, but there are two general approaches economists can take to reach a GDP number. The first is to add up the total number all working individuals and businesses earned within a year. The second is to add up what everyone spent. The income approach is less commonly used than the expenditure approach, but all things considered, both calculations should reach roughly the same number. When the GDP is up, the nation has a lower unemployment rate and workers see wage increases. When the GDP is down, the nation faces higher unemployment rates and workers sometimes see wage restrictions.