ALL THINGS BIG AND SMALL 2.0

Hardly a week passes by that we do not read articles in the newspapers, or hear on news broadcasts, the word "Gross Domestic Product" [GDP] when the subject is economic growth or comparison of living standards among countries. While statistics can be enlightening, statistics can also lie if you are not really clear about what GDP means and how it is calculated. Here is an article abstracted from my weekly newsletter for www.valuengine.com , which attempts to illustrate what is, and what is NOT GDP and some of the problems associated with any attempt to compare GDP across countries. A nation is like a corporation. Its production, income, and expenditure can be measured according to accounting principles, and a figure arrived at, that hopefully gives some information on the 'well-being' of the nation/corporation. This is the subject of National Accounts, and Gross Domestic Product is one of the measures in National Accounts. GDP measures the size of the U.S. Economy, ...

At every Fed meeting, whether Bernanke raises interest rate or not depends on whether he thinks there is Inflation. Understanding Bernanke means understanding clearly the concepts of Inflation, Economic Growth and Productivity. And so What’s Hot for this week features a short lesson on Inflation, Economic Growth and Productivity. Inflation happens in an Economy when Price growth outstrips Output growth, resulting in spiraling prices [including spiraling wages, the price of Labor], and loss of incentive to work and save as costs living became unmanageable. Extreme cases of inflation [such as sometimes happens in third world countries like Zimbabwe or Indonesia] will mean you have to carry a wheelbarrow full of notes to Wal-Mart. And you would not want to keep money in the bank or under the bed when you know $1 will be worth less than $1 tomorrow. One way Inflation can happen is when the rate of Productivity growth is less than the rate of Economic Growth. Simplified Example: There is a ...