Why Does GDP Matter?
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Friday newsletters are devoted to answering questions from our community. Do you have a question for us? You can send an email to info@themoneyafrica.com or a DM to any of our social media platforms.
Question
What is a trust and how can I invest in one?
Answer
A trust is when you hand over the management of your assets to a third party known as a trustee. A trust can contain any kind of asset such as property, stocks or real estate. In short, anything.
Trusts are set up for various reasons. One of the most common reasons is that it is a relatively easy way to pass on assets to beneficiaries while one is still living. This is unlike a will that takes effect when the owner of the assets in question has passed on.
So one can set up a trust for one’s children, for instance.
The third-party that manages the trust is known as a trustee. A trustee can be an individual or a company.
Question
What does GDP mean and why does it matter?
Answer
GDP means Gross Domestic Product, and it is the final value of goods and services produced in a country within a defined period, usually a quarter (3 months) or a year. Here is a video that breaks down Nigeria’s 2020 GDP numbers.
A positive GDP means the economy is growing. A negative GDP (or a slowdown in GDP) means the economy is contracting.
Nigeria (and many countries across the world) fell into a recession last year. This was largely due to the drop in the price of crude oil and the effects of the COVID-19 lockdown. A recession is two consecutive quarters of negative growth in an economy. Simply put, the economy shrinks in size. In Nigeria’s case, it contracted by 1.9% in 2020.
So why does GDP matter? GDP is one of the indicators used to measure the health of an economy. It is not the only indicator, though. There are a few others such as the unemployment rate and inflation rate.
Recent figures by the National Bureau of Statistics (NBS) placed the unemployment rate at 33% and the inflation rate at 17.33%. A persistently high inflation rate means money rapidly loses its purchasing power.
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