GDP question. Why it equates with size?

[Notaneconomist]

Newbie question.

I'm puzzled by comparing economic size of countries. What does
GDP measure and why is it considered economic size?

For example. If a pencil costs 5 cents to produce in China...it is 5 cents towards GDP....if the same pencil costs 25 cents in the USA....it is 25 cents towards GDP. So producing 4 pencils in China is less towards GDP than 1 pencil in the USA. However, there are more pencils in China.

When comparing economies, wouldn't
China have the largest economy in the world just by sheer volume of stuff...feeding 1.33 billion people, etc?

Anyways, why is GDP equated with size of the economy? If a country has 5% inflation but doesn't produce any more goods, activity....it's GDP goes up 5%? I'm missing some part of all this.

 

[oldfart]

Newbie question.

I'm puzzled by comparing economic size of countries. What does
GDP measure and why is it considered economic size?

For example. If a pencil costs 5 cents to produce in China...it is 5 cents towards GDP....if the same pencil costs 25 cents in the USA....it is 25 cents towards GDP. So producing 4 pencils in China is less towards GDP than 1 pencil in the USA. However, there are more pencils in China.

When comparing economies, wouldn't
China have the largest economy in the world just by sheer volume of stuff...feeding 1.33 billion people, etc?

Anyways, why is GDP equated with size of the economy? If a country has 5% inflation but doesn't produce any more goods, activity....it's GDP goes up 5%? I'm missing some part of all this.

GDP is the most common measure of an economy's production of goods and services. When international comparisons are used, this figure is adjusted by a method called "purchasing power parity" (PPP) which makes the same good be valued the same in computing different country's GDP. So a pencil in China and a pencil in America contribute the same to each country's GDP.

For a list of country's by PPP-adjusted GDP per capita, check out my favorite source for international economic statistics, the CIA Worldbook.

https://www.cia.gov/library/publications/the-world-factbook/rankorder/2004rank.html