What Is GDP?
At a high level, let’s first observe that gross domestic product (GDP) is 70% consumption. Said another way, consumption is simply you and I buying things. These things can be daily routine staples, a new car, or a household appliance, as well as any services and other non-tangible items. Clearly, in order to consume you must have income, or otherwise have the capacity to spend. Fundamentally, inflation erodes that capacity through rising prices that increase faster than your income.