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I find thinking about "final" goods and services tricky. A country could import crude oil and refine it locally, then sell it as gasoline (and jet fuel, lubricants etc). Crude is not a final product, but gasoline (etc) is. Likewise, a country could import coal or gas to burn locally for electricity. The electricity is the final product for consumers, but it is an input for companies (who need it to make their final products).
Sorry one last question. If GM sells a car for 1000 dollars then the second hand shop sells it for 1500? would GDP count the 500 as a service so the total gdp would be 1500? Thanks ;)
It would start from the moment the metals and plastics and stuff used in making the car are made. Then, after being made into a car and sold, the added value is taken. Like the guy above said, used products aren't recorded
Questions Expenditure done by govt giving salary to its employees are considered two times by the equation. Government gives money to employees that employees is using that money to invest and consume. How's that?
If one defines "investment", contrary to basic human logics, as "expenditures of firms", then why does one not call it "expenditure of firms"? I mean, there must be a reason.
I think the consumer of household also include the investment of firm, because it is included in the final price. Therefore the GDP is double included the investment fee of firm. Can anyone explain for me?
@@sakshikumari5621 i think, for ex: when a firm A buy a robot to refine water, thus the cost of buying robot is also taken in to account in the final price of water bottle. The price of bottle is added to C, the price of robot is added to I. Then I think the robot cost is included in both C and I. Could you help me figure out my mistake. Thanks
A few mixups between income and exp approaches in comments below. @marc If gov pays the salary then it is considered "g". @userlous : it only counts as "c" because it is the consumer "expending". If GM invested in Property/Plant equip then it would be I. @menogoth no: high taxes and spends nothing would not is not necessarily equally prosperous, depends on other components...high taxes reduces "c" because it lowers disposable income, and if govn't doesn't spend...Then G is not impacted..
How does GDP account for a Commodity or Stock trader selling and buying a stock several times in a day? Do all the transactions of the day add up to register as GDP produced on that day ?
Doesn't newly constructed houses belong to the gross private domestic investment(private sector/firms) and not to the personal consumption expenditures(household)?
Newly constructed buildings like factories and stuff should be for the firms, while houses are for households. I read that it's considered as savings, hence why its in investment not consumption
Please underline exactly how government expenditure is "useless" at improving the lives of consumers. Correct me if I'm wrong, but isn't that EXACTLY what government expenditure is ultimately for albeit in the short or long term.
The Government expenditure that's recorded in the national income accounting does not contain transfer payments such as pensions and other stuff. And those take up a huge part of it. What's left is really little and is used for many other stuff
Greatly explained,,but i have a confusion,how do u come to know about the expenditure of household.I mean do we ask each household how much is your monthly expenditure or is there any other way of doing it???...Plzzz Help N plz respond........
no, because air is not a scarce resource. If you buy something that is scarce resource like pure nitrogen, oxygen etc that would count as it will take time, energy and resource to make it.
You are buying something that already exists and it does not add any value. But if you were to construct a building and blow it up just to construct it again over and over, by employing labour, buying materials, purchasing machines, paying taxes etc then yes it will add to the GDP. As an economist once said, if you want to boost your economy then just make a man dig a hole and fill it.
cont: in Keynesian econ, this would be putting brakes on the economy if overheated and part of fiscal policy. @kyle your econ class used (G-T) to account for taxes? ok, not sure the lesson was grasped, unless prof was trying to illustrate another point...no clue what. G-T implies Gov't spending minus taxes. It simply reduces the disposable income but it's is still only EXPENDITURE that counts. $100 salary less $20 in taxes=$80--he spends all. C=80 Government spends all tax...G=20. GDP 100
So by your logic a country with a government that levies high taxes and spends little to nothing, should be equally as prosperous as one that spends most of what it takes in.
@Sues.. don't include Government? well, i take it you are using a Classical Approach rationale that government takes away from the productive private sector. But as an illustration in most recent crisis and use a little logic. Corps healthy and sitting huge pile of cash. Should they spend on PPE or salaries if "C" isn't buying. (and C is 2/3 of GDP) So what do they do to the cash? They issue bonds at record low and buy back own stock at record lows... impact on GDP and jobs? zip
