What Is GDP?

Lesson Plan - Get It!

Audio:

What Is It Measuring?

The gross domestic product, or GDP, is a measure of the total amount of goods and services produced in the country in a given year.

This dollar amount is placed on the economy and utilized as an indicator of the health and strength of the nation's economic situation. Politicians constantly talk about raising the GDP and express their desire to make it grow "faster than it ever has before."

• If you really wanted to do that, what would you target?

Examples

The GDP is composed of consumer spending, investment, and government spending.

Some examples of consumer spending are:

• groceries
• cars
• electronics

Some examples of investment are:

• building projects
• homes
• land

Some examples of government spending are:

• infrastructure
• space program
• defense industry

All of these make up the gross domestic product. Because of the diversity in the items that are included, there are many different ways in which to grow the GDP.

Since the end of World War II, American presidents have tried to maintain the post-war boom. As you watch the video below on how the GDP growth rate rose and fell with each president, pay attention to the element of luck.

Republicans or Democrats: Who is better for the economy? from WWLTV:

While presidential policies can have an impact on the economy, the policies of one person over the course of four or even eight years can rarely change the growth rate of the GDP in a significant and immediate way.

The video explored how mere luck can affect GDP growth.

• What are some other factors that could potentially be more influential than presidential policy?

If a large portion of the GDP is driven by the items consumers purchase, but people begin to save more of their money, this would decrease the GDP much more than any government policy would.

Also, because government spending is a major part of the GDP, a huge expense like a war or a program like the New Deal dramatically raises the GDP as well.

Presidents, on the other hand, utilize two devices in an attempt to affect the economy. Traditionally, modifying taxes and unemployment have been a president's two agents in trying to improve the gross domestic product.

Think about how these two devices are different than the production of war supplies or groceries as you move into the Got It? section.