For the people who want to delve into the mechanics of income and expense calculation on a national level, one can go to Wikipedia:
http://en.wikipedia.org/wiki/Gross_domestic_product for GDP and:
http://en.wikipedia.org/wiki/Gross_national_product for GNP.
I will make a point concerning trade. It use to matter if a country was running a significant trade deficit over a extended period of time, when international accounts were settled in gold. A country tied its currency directly to gold by the exchange rate you could redeem a quantity of gold for that currency. The country running a negative trade balance would adjust the exchange rate for its currency (depreciating) to redeem less gold for more currency to break even on trade. If no exchange rate adjustment was made, that country ran out of gold and could no longer trade.
Today, the world trading is settled with currency only and is principally conducted in dollars. The U.S. is the largest debtor country in the world today and its debt is growing and has been growing since the 1960s. Way back then, the national debt was financed from domestic savings and we were running a positive trade balance, on the gold standard. Today, about half the national debt is financed by foreign savings and that is mirrored in our trade deficit. If we were still tied to the gold standard, this country would have been bankrupt long time ago.
It is strange how people and the media view inflation. When assets go up in value (IE. stocks, houses, etc.), people view that as appreciation in value, instead of asset inflation. Asset inflation leads to real inflation when there is a demand for currency or credit or the other way round. Easy credit and excess currency leads to real inflation; assets, commodities, wages, etc. It is called the velocity of money. It can be found also in Wikipedia:
http://encyclopedia.thefreedictionary.com/Velocity+of+money
Wikipedia mentions GDP however, I was taught it is related to GNP as follows:
GNP = PRICE X QUANTITY (price of goods and services, quantity of goods and services)
Theoretically then:
M*
V =
P*
Q where M = money supply, V = the velocity of money transacted, P*Q = GNP.
By inspection of the above formula, if GNP is growing, it is because the velocity of money has speeded up or the money supply has been increased. Or looking at it another way, if the quantity output remains the same, the price went up for the goods and services in order for GNP to grow. This all relates to productivity, inflation and FED policy.
Anyway, we are all helpless, even if we understand economics because the government sets the policy for spending and credit creation. We can only react to those changes.
