The Gross Domestic Product, or GDP
, of a nation measures all activity in the formal economy
. This is all declared
. However, this is certainly
not all the work that goes on in the economy
My mom pays me a few pounds a week to mow the lawn. I don't declare this to the Inland Revenue, and thus they have no record of it. Work happened, but it's not in the GDP. This is part of the informal economy.
It's really difficult to work out how much unpaid and undeclared paid work is carried out. Estimates abound, such as, of total work been done:
- Formal paid work: 46%.
- Undeclared paid work: 3%.
- Domestic unpaid work: 51%.
Many people consider these figures to be conservative
Anyway, the GDP is usually used to measure the rate of economic growth in an economy. Sometimes index numbers are used because of the massive figures we would otherwise have to deal with. GDP per capita is calculated by doing
GDP / population
and is a fair indication of the standard of living, although as the figure doesn't specify who the money belongs to, it could mean there are just a rich elite in the country with a lot of money, and the rest of the population are poor.