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What is the Gross Domestic Product?

Economists need to be able to estimate how productive a country is as a whole. To do so, they look at the Gross Domestic Product, or GDP.

The GDP of a country is the value of all the goods and services produced by labor and property located within that country.

Sometimes the GDP is reported as a whole; sometimes it is reported as an amount per capita (the whole amount divided by the number of people in the country). To measure the GDP, statisticians add up all the spending by people, government and investors, including all the spending done by foreigners within the country.

In the United States, the GDP for 2002 was $10,586,300,000,000 ($10.85 trillion).

In other words, in 2002, about $10.85 trillion worth of goods and services were produced by labor and property located in the United States.

To compare to another country, the 2002 Canadian GDP was, in U.S. dollars, $729,007,600,000 ($0.729 trillion).

From these numbers, you can see that the U.S. economy is about 14.5 times the size of the Canadian economy.

Of course, you would expect that the U.S., which has a lot more people than Canada, would have a much higher GDP. To compare the countries more fairly, we can normalize the numbers by calculating the per capita GDP. That is, we can divide the total GDP of each country by its population. This gives us a rough measure of the average productivity per person.

For the U.S., the population is about 290,000,000 people. This gives us a per capita GDP of about $36,500/person.

For Canada, the population is about 31,500,000 people (although it looks like more, because everyone is bundled up from the cold). Using this number gives us per capita GDP of about $23,100 (in U.S. dollars). This is about 63% of the U.S. figure.

As I was working on these calculations, I talked to an economist who works for the Canadian government. When we looked at the difference in the two per capita GDPs, she warned me to be cautious about drawing any conclusions.

Actually, the only reason for the difference that I can see is that, although I was born and raised in Canada, I moved to the U.S. a long time ago. This may or may not account for the disparity.

(Economics can be tricky.)