Editor’s note: Sometime we come across terms that are either hard to understand or difficult to relate with our everyday life. In an effort to help our readers, we are launching a new series today where we try to explain the meaning and relevance of some of the most important economic indicators. If there is any term that leaves you baffled, please share with us in the comment section and we will try to tackle it.
It is one of the major indicators that reveal the health of the economy. It represents the total value of all goods and services produced over the year. Since it defines production and growth of the whole economy, it has a huge impact on everyone living in the country. For instance, when the GDP is good, wages are high, unemployment is low and trade activity booms. It is also crucially important for the government as it uses the data to announce policy or decide how much it can afford to spend on public services, such as hospitals, schools and housing.
Economic figures aren’t as abstract as you might think. Every penny you earn or spend, every product you manufacture, and every financial decision you make all contribute to data calculation and government policies that in turn have direct influence on your economic activities and then the whole economy at large.
GDP growth is an intrinsic driver of national employment. Recent statistics show that just 1 percent increase in GDP can translate into 1.3 to 1.5 million new jobs in China, owing to the booming service sector in the country. The 1 percent increase in GDP was adding 1 million new jobs just a few years ago. That means a GDP growth of 7.2 percent is needed for 10 million new jobs with a registered urban unemployment rate at about 4 percent.