Author: John Bouman

Per Capita GDP Per capita GDP is the value of gross domestic product per individual of a country. If nominal GDP is $30.62 trillion (the approximate 2025 GDP of the United States), and its population is 343 million (the approximate 2025 U.S. population), then 2025 U.S. per capita GDP is $89,271 ($30.62 trillion divided by 343 million). For a video explanation of how per capita GDP is calculated, please watch: Below is a table of the countries with the highest per capita GDP in the world. While the United States and China are first and second in total (nominal) GDP, countries such as Monaco, Liechtenstein, and Luxembourg top the list in per capita GDP in 2025.  According to the International Monetary Fund, the United States per capita GDP ranks 9th of all countries in the world and China ($17,000) is 70th. African countries such as Burundi, South Sudan, and Malawi have the lowest per capita GDP at approximately $200 – $500 per person per year. For a full and updated list of GDP and per capita GDP amounts for every country in the world, visit www.imf.org (www.imf.org). Country/Area Recently Reported (most from 2025) Per Capita GDP (in 1,000s of US dollars, rounded to the nearest $1,000) Monaco 257 Liechtenstein 232 Luxembourg 147 Ireland 129 Switzerland 111 Iceland 98 Singapore 94 Norway 92 United States 89 Denmark 77 World (Gross...

Nominal Gross Domestic Product Nominal GDP is GDP using current quantities and current dollars. It is calculated by multiplying the number of products by their current prices. An increase in nominal GDP does not necessarily represent an increase in production. If prices double from one year to another and production remains the same, nominal GDP will double. Real Gross Domestic Product Real GDP is GDP using current quantities and so-called constant dollars. It is calculated by multiplying the number of products by constant prices from a base year. For example, we can select the year 2018 as the “base year,” and calculate real GDP in other years by using prices from the year 2018. Real GDP, therefore, only measures the changes in the volume of production. This is a better indicator of economic activity and economic health. Example Problem: Let’s suppose that a very small country makes only two commodities: pizzas and smart phones. The country bakes 200 pizzas at $10 each in year 1. In that same year, it manufactures 100 smart phones at $50 each. In year 2, the country makes 190 pizzas and 110 smart phones at respective prices of $12 and $60 each. Using year 1 as the base year for calculating real GDP, what are nominal and real GDP for each year? The solution is given in the table below: Production and Prices Year...

Per Capita Production of the Fifty U.S. States and the District of Columbia A state’s yearly production is measured by its Gross State Product (GSP). The following table includes a ranking by per capita Gross State Product (measured in US dollars) of each of the fifty states and the District of Columbia. This calculation uses current prices, so states with higher prices (for example, Alaska, Connecticut, Massachusetts, California, and New York) tend to have higher GSPs. They may be productive in their own right, but the higher price level inflates their GSPs relative to states with lower prices. The District of Columbia is ranked first, primarily because of its government presence, combined with its relatively small population. Alaska has both a high cost of living and a relatively small population. Delaware’s high ranking is primarily because of its strong corporate presence and its favorable tax laws. North Dakota and Utah increased their GSPs the most out of all states. North Dakota increased primarily because of its lucrative shale oil production (fracking), and Utah because of its favorable overall living conditions (weather, health care, education, infrastructure, etc.) which attracts businesses. State or area and rank in 2006 2006 GSP per capita 2010 GSP per capita 2014 GSP per capita 2016 GSP per capita 2019 GSP per capita 2022 GSP per capita 2025 GSP per capita 1 District of Columbia 124,363...

The Two Approaches to Calculating GDP There are two ways to calculate GDP: the expenditure approach, and the income approach. Each method results, if done accurately, in the same GDP amount each year. The expenditure approach is based on what we spend on final goods and services. The income approach is based on how much money we earn through the various forms of income (plus depreciation). The Expenditure Approach to Calculating GDP Goods and services are purchased by four different groups of buyers: consumers, businesses, state and local governments, and foreign countries. Therefore, GDP can be calculated by summing these four components: Consumption (C) + Investment (I) + Government Expenditures (G) + Net Exports (X). Examples of Consumption expenditures include spending by households on final products, such as clothing, televisions, dishwashers, computers, education, banking services, smart phones, cars, and food. Investment represents purchases by businesses, such as machines, equipment, company-owned buses, forklifts, trucks, supplies, and buildings. It also includes inventory changes. Some goods may have been produced, but not sold (remember that GDP measures production, not sales). Investment in economic terminology does not mean the purchases of financial products, such as stocks and bonds. Stock and bond trades are merely transfers of ownership and do not directly represent production. Government Expenditures are expenses by the government on items such as construction materials for roads and highways, supplies, tanks, weapons,...

Real Gross Domestic Measures Production of Final Products Real Gross Domestic Product measures the inflation-adjusted total or aggregate production of final products produced in a country during a period of time. The higher real GDP, the more productive the country is during that year. The more the country produces, the more goods and services its people enjoy for consumption and production. This usually means that the country has achieved a higher standard of living. There are a few instances, however, where a higher real GDP does not necessarily mean greater happiness or a greater standard of living. These instances include environmental concerns and issues related to lack of leisure time. Environmental Concerns If increased production is accompanied by greater amounts of pollution, then there is a trade-off. Environmentalists focus on this relationship, and claim that increased pollution and the depletion of natural resources lowers people’s standard of living. Environmentalists, therefore, support halting economic growth in order to preserve the environment, natural resources, and wildlife. An alternative philosophy is that even though economic growth may lead to environmental damage in the short-term, it leads to a greater standard of living and, therefore, more resources to fight pollution, in the long term. Pro-growth advocates argue that economic growth allows us to find solutions to environmental and social problems. Technological advances in the development of alternative resources, the production of cleaner products...