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How rich are we?

What Dr. Dr. Money says
The concept of urban architecture landscape and financial stock
Austria is regarded as a wealthy country. The reason is our high Gross Domestic Product, or GDP for short. But what exactly is the GDP?
How rich are we?
The GDP (Gross Domestic Product) is a measure of the performance of a national economy. It is calculated by adding up the market value of all goods and services produced by a country’s inhabitants. The economic output of citizens and non-citizens counts towards the GDP, as long as it is produced within the country’s borders. The rate of change of the GDP is a measure of a country’s economic growth. If this year’s GDP is bigger than last year’s, the economy has been growing. The GDP is also a yardstick for overall wealth: the higher a country’s GDP, the wealthier it usually is.

Value of all goods and services = GDP

Only goods and services for final consumers are taken into account in the GDP total. An example: If an Austrian fashion company has produced skirts, trousers and T-shirts with a total value of one million euros, this million counts towards the GDP. The cost of factor inputs is subtracted from the total. This means that the value of fabrics, buttons and zips which the company used to produce the garments is not included in the total. The value of services is also added to the GDP total. So if you pay 50 euros at the hairdresser’s, the 50 euros will be added to the GDP total.
Only formally recognized and paid services are counted
If a friend had given you a haircut as a favour, they would also be performing a job. But it would not count towards the GDP because no bill was issued, and you did not pay for the haircut. The GDP only measures formally recognised products and services for which payment is made.

Nominal and real GDP

It’s a well-known fact that (nearly) everything keeps getting more expensive. As a result, a country’s GDP may rise even though production is not growing – in this case, the only driver are price increases. This is why experts differentiate between “nominal GDP” and “real GDP”.
Increased production or just higher prices?
Nominal GDP is calculated at current prices. So if the fashion company from our example produces the same number of skirts, trousers and T-shirts this year as it made last year, but gets paid € 1.1 million for its output, then its contribution to the GDP in nominal terms has grown by € 100,000. The “real GDP” reflects how productive we have actually been. In calculating it, the prices of a baseline year are used. In reality, these “constant prices” no longer exist, but the resulting GDP figures can be more usefully compared.

„Per capita GDP“ – the average economic output of each inhabitant of a country

“Per capita GDP” is calculated by dividing a country’s GDP by the number of its inhabitants. Per capita GDP is an important measure of wealth. However, it does not indicate how wealth is distributed across society. Neither does the GDP figure say anything about the quality of life in a country.
Data are available online
Austria’s GDP is calculated each year by “Statistik Austria” and published online. Quarterly GDP figures are determined each quarter of a year by the Austrian Institute of Economic Research. These numbers are also available on the “Statistik Austria” website.

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How rich are we?

What Dr. Dr. Money says

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