GDP vs. GNP: GDP measures output produced within a country's borders, regardless of who produces it. GNP (Gross National Product) measures output produced by a country's residents, regardless of where. For the US, the difference is small (~0.5%). For countries with large overseas worker populations (Philippines, Mexico), GNP can significantly exceed GDP.
Nominal vs. Real GDP: Nominal GDP is measured in current prices. Real GDP adjusts for inflation — it measures how much physical output was produced. If nominal GDP grew 10% but prices rose 7%, real GDP grew only ~3%. Real GDP growth is the meaningful measure of standard of living improvement.
GDP per Capita: GDP divided by population — the most common welfare measure. US GDP per capita ≈ $76,000 (2023). Limitations: doesn't capture inequality (a billionaire and a homeless person average $38,000 each), doesn't include unpaid household work, natural capital depreciation, or leisure. Better alternatives: OECD Better Life Index, UN Human Development Index.
Why NX negative ≠ necessarily bad: The US trade deficit (NX ≈ −$800B) is an accounting identity: it equals the difference between US investment and US saving. The US attracts more foreign investment than it sends abroad — foreigners want to hold US assets. A trade deficit means Americans consume more than they produce today, financed by foreign savings. This is sustainable as long as those foreign investors remain confident in US assets.
What's NOT counted in GDP: Unpaid household work (cooking, childcare), black market transactions, volunteer work, natural capital depreciation (oil reserves drawn down, topsoil lost), leisure time, quality improvements not captured in price changes. GDP can rise while well-being falls — a hurricane increases GDP (reconstruction spending) while destroying wealth.