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  The Real GDP and Six Key Indicators of Macroeconomics

Real GDP:

A) "Real" implies that this measure corrects for modifications in the overall level of prices.

B) "Gross" implies that this measure comprises the substitution of worn-out and obsolete tools and structures as well as entirely new investment.

C) "Domestic" implies that this measure calculates economic activity which occurs in the United States, whether or not workers are legal inhabitants and whether or not the industrial units are owned by American companies

D) “Product" implies that real GDP measures production in America of final goods and services. It comprises consumption goods (objects which customers buy, take home or take out, and consume) and investment goods (objects like machine tools, buildings, freeways, and bridges, that increase the country's capital stock and productive capacity). It also comprises what government buys: things that government (acting like our collective agent) buys and uses.

Real GDP categorized by is deficient measure of how well the economy manufactures goods and services which people find helpful--the necessities, conveniences, and luxuries of life. It says nothing regarding the comparative distribution of the nation's economic product. It measures marketplace prices, not user satisfaction. It is a deficient measure of material well-being.

In the year 2000, calculated by means of 1992 prices, officially-measured U.S. real GDP per worker--the full amount of all final goods and services produced in the US, categorized by the number of staff in the labor force--reached $65,000. The measured output of the average American worker had quintupled ever since 1890, when the typical estimates of 1992-price real GDP per worker was near about $13,000. Amazingly, this upward leap in financial well-being was achieveed in a little over three generations.

Figure below shows this upward trend in real GDP per worker. In spite of temporary setbacks in recessions and depressions--of which Great Depression of 1930s--was by far the largest-- principal event of the 20th century was this quintupling of measured real GDP per worker. Other macroeconomic events observable in the figure comprise the World War II boom, the 1974-1975 and the 1980-1983 major recessions, the 1990-1991 minor recession, and the two-decade lengthy period of stagnation from early 1970s to early 1990s--a time that saw the 1973 and 1979 sharp oil price raises by OPEC, and the large investment-decreasing government budget deficits of the 1990s.

Note: This figure says nothing at all about how economic growth was distributed. As a matter of fact, between the year 1930 and 1970 saw the center and working classes reduce the relative income gap among themselves and the rich. Between the years 1970 and the present have see this gap open wider once again.

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Figure: Real GDP per worker officially measured in USA

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