Note: This is post #71 in a weekly video series on basic economics.

“Are you better off today than you were 4 years ago? What about 40 years ago?”

These sorts of questions invite a different kind of query, says Alex Tabarrok: what exactly do we mean, when we say “better off?” And more importantly, how do we know if we’re better off or not?

To those questions, there’s one figure that can shed at least a partial light: real GDP. In this video by Marginal Revolution University, Tabarrok explains how real GDP is calculated and how it can be used parisons.

(If you find the pace of the videos too slow, I’d mend watching them at 1.5 to 2 times the speed. You can adjust the speed at which the video plays by clicking on “Settings” (the gear symbol) and changing “Speed” from normal to 1.25, 1.5 or 2.)

Click here to see other videos in the Introduction to Economics series.