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>It gets even crazier: > >Economy C, the government pays workers $5m total to dig unwanted ditches. Nobody gets a computer. Because GDP is not nor was it ever
by crdoconnor 12y ago
>It gets even crazier:
>
>Economy C, the government pays workers $5m total to dig unwanted ditches. Nobody gets a computer.
Because GDP is not nor was it ever meant to be a measure of how great your country is. It is simply a measure of the total volume of transactions (which correlates to wealth but is far from being the same thing).
- jvm 12y agoCertainly Nominal GDP is a measure of the volume of transactions. However, PPP-adjusted GDP is intended to be a measure of national income in real terms, or put another way, the amount of value actually produced. Which is how people often intuitively think of GDP.
- crdoconnor 12y agoUm, $5 million to dig a ditch still means no value produced even if it was PPP adjusted.
- jvm 12y agoNominal GDP: $5mil PPP adjusted: $0
- crdoconnor 12y agoPPP simply adjusts for local costs. It does not adjust for the value created during a transaction.