The economy of a country is characterized by a multitude of economic agents, inter-connected and operating in several sectors of activity. While some produce (companies), others consume (mainly households) and others ensure the implementation of economic policy and public investment (the State and its public administrations). Liberal economists argue that each economic agent, in his or her quest for personal well-being, contributes to the happiness of the community. However, quantifying aggregate happiness or the level of economic activity in an economy is not an easy exercise.
Fortunately, national accounts provide macroeconomic aggregates that capture the overall level of economic activity over a given period of time (usually a year). The best known and most widely used is the Gross Domestic Product (GDP).
GDP is the sum of value added generated by the residents of an economic territory, minus total intermediate consumption (i.e. the value of all goods used and completely destroyed in the production process). It presents the overall economic situation of the country during a given period. A positive increase in GDP is a sign that the economy is generating more resources and wealth, which should lead to an improvement in collective well-being. However, the transition mechanism between an increase in a country's wealth and an improvement in the well-being of the population is not systematic. In order to do so, one must question the genesis of growth and the distribution of wealth.
It must be hammered out that GDP alone is not sufficient to quantify the level and dynamics of a country's economic activity.
CJEA