Teaching Your Kids Economics

I believe that everybody-and that includes your kids-should have some basic knowledge of economics and be financially literate.

Else you are at a disadvantage in today's world.

* for the full .pdf document you can email me and I will send to you.

Lesson 1: What is GDP (Gross Domestic Product)

* We use the US economy as our case study. And the data source is FRED (US Federal Reserve Education Department)

GDP — Gross Domestic Product — is the total value of everything a country makes and sells in a year: every burger, haircut, movie ticket, house, and computer chip. It's the best single number we have for measuring the size of an economy. Right now, the US economy produces goods and services at a pace of about $31.9 trillion per year — that's $31,900,000,000,000!

Economists count GDP by adding up four kinds of spending. The equation looks like this: GDP = C + I + G + (X - M) . See attached Table 1 for what this equation means.

Now let's plug the real numbers into the equation (all figures are yearly rates, first quarter of 2026):

$31.9T = $21.6T (C) + $5.6T (I) + $5.4T (G) + ($3.5T - $4.3T)

$31.9T = $21.6T + $5.6T + $5.4T + (-$0.8T)

#Notice that (X - M) is negative $0.8 trillion. That's called a trade deficit — America buys more from other countries than it sells to them, so a little gets subtracted at the end.

The % that each component contributes to GDP is shown in the pie chart below. Consumption accounts for Approximately 70% of the US economy. Which is why, the Federal Reserve (the de facto Central Bank of the USA) monitors labour market statistics like non-farm payroll, rate of unemployment, job losses, and vacancies by sector.

How has the US economy been performing over the last decade? See chart on GDP growth rate . Note the drastic impact of the 2020 Covid19 epidemic, but also the dramatic rebound in the post-Covid period. Note that this chart shows real growth i.e. rate of growth minus rate of inflation

How did each component of GDP perform? #Imports declined significantly when the Trump Administration imposed a wide range of Tariffs on imports .

In the final chart, you can see that investment in AI and tech is soaring and contributes to GDP. But the size of its contribution under the I part of C+I+G+(X-M) may mask the fact that the rest of the economy is not so healthy.