this post was submitted on 08 Oct 2024
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During WWII they invented the concept of gross domestic product to quantify a country's ability to wage war. The higher the GDP, the bigger the military it could support.
GDP is a measure of how much economic activity there is. If I pay you and then you pay someone else and then that person pays me the same amount we've increased the GDP without actually doing anything. So the US, knowing this was their key performance indicator, set about increasing GDP.
So they make everyone buy a car, then gas, then service, then insurance instead of building rail infrastructure. The same goes for child care: If you make it so both parents have to work and pay someone else to watch their kids that's a much bigger boost to GDP than one or even both parents being able to stay home and raise their kids. Having everyone in a suburb have to buy their own lawnmower and trimmer and grill and stove and washer/dryer and dishwasher also boosts GDP way more than sharing things.
Plus there's the fact that cars require a lot of the same technologies and factories as a lot of war materiel. If we were ever to be in another global conflict we'd need to build all the guns and trucks and uniforms at home, and without a strong car industry we'd have to start a lot of that from scratch.
But we've got the biggest GDP in the world so I guess that's something.
Wrong. This transfer of funds would be taxed in some form or the other. GST if u r a registered business. If u aren't, it would come under personal income tax. Therefore, it would not be profitable for you to do this money exchange without expecting something in return. If you say that you simply enjoy seeing cash change hands, then u r generating value. U r getting pleasure in return of doing this experiment. Soooo that does come under GDP.
Now of course, GDP shouldn't be the only metric you judge a country by. It's clearly very flawed in measuring stuff like quality of life per person, wealth inequality and so on. However, it doesn't mean that you should completely ditch it either. It certainly has its use case when trying to understand the economy of a country.
Wrong. Most jurisdictions have Value-Added Taxes, including I'm pretty sure all places that call their sales tax GST (Goods and Services Tax). In the given scenario, as long as the businesses were making those purchases (as business expenses), they would take the taxes paid as ITCs (Input Tax Credits), and be left will a GST bill of NIL.
Source: Here's Canada's info on ITCs. It's pretty similar in other jurisdictions.