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Featured Advisor

Srbo Radisavljevic
Managing Principal/Investment Advisor

Edge Portfolio Management


State: IL

At Edge, a low client to advisor ratio allows for personal and customized service for each individual.  Our goal is to work as a team for each client to provide not only portfolio management but wealth coordination and financial planning.  We make every effort to have frequent communication with our clients and to provide timely response to calls and emails.  I also enjoy spending time with my wife and three kids, following Chicago sports, enjoying ethnic cooking, and serving as a school board member for Norridge School District 80.

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GDP, the Deficit, the National Debt and How They Relate

A three-part article on how they interrelate

Part 1 – GDP

Regularly, MillionaireCorner and other news organizations report on economic indicators for the U.S. economy such as the GDP.  GDP, or Gross Domestic Product, is a measurement or calculation of the value of all of the goods and services produced by a country over a period of time, usually a year.  In the United States, the GDP for 2010 was $14.6 trillion as calculated by the U.S. Bureau of Economic Analysis.

Simply stated, the calculation for GDP consists of

Personal Consumption of Goods and Services + Business Investment + Government Spending + Exports – Imports = GDP

The U.S. is a consumer-driven economy, meaning that people consume a majority of what is produced in the U.S.  Over $10.3 trillion of the U.S. GDP in 2010 was for personal consumption of goods (both durable and non-durable) and services which amounted to 70.6% of the $14.6 trillion total.

The U.S. economy is the largest single country economy in the world.  The European Union (consisting of 27, mostly European, member nations) has a larger GDP of $15.9 trillion.  After the EU and the U.S., come China ($5.7 trillion GDP), Japan ($5.4 trillion GDP), Germany ($3.3 trillion GDP), France ($2.5 trillion GDP),  and the UK ($2.3 trillion GDP).  The GDP of the entire world is $62.9 trillion, according to figures from the International Monetary Fund.

A GDP measurement, calculated quarterly in the U.S., gives signs as to the health of an economy.  An increasing GDP usually indicates a growing economy with more goods and services being produced.  It might also indicate that jobs are being created or that exports are increasing.  A GDP growing at 4% to 6% for a fairly mature economy such as the U.S. is widely considered to be a healthy rate of growth without risk of an overheated economy and the inherent risks of inflation.

Emerging economies such as Brazil and China may report GDP growth rates of 8% or more.  But with such high rates of growth come increased inflation fears.  Governments frequently respond with a tighter monetary policy to slow growth and quell inflation.

For the fourth quarter of 2010, the Bureau of Economic Analysis for the U.S. released a final estimate for GDP growth of 3.1% for the economy.  This rate of growth was dragged down somewhat by a stubbornly slow housing market but buoyed by consumer spending in the quarter.

Next:   Part 2 - The U.S. Deficit and GDP