Chapter 8 GDP—Overrated

Gross domestic product (GDP) is probably the most universally followed economic data point. It is old and lumbering and frequently wrong. There have always been many shortcomings in the measurement and use of GDP, but it is widely used to measure economic growth and the size of an economy. However, as an economy goes through periods of innovation and rapid changes, its use as a tool to measure actual economic activity gets even weaker. Despite its flaws the securities markets still react when the GDP news release comes out, understanding GDP’s weaknesses and the value of other measurements of economic activity can give an investor an advantage.

GDP is the total market value of goods and services produced in a country. ...

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