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In thinking about what is produced in the economy, many non-economists immediately focus on solid, long-lasting goods, like cars and computers. By far the largest part of GDP, however, is services. Moreover, services have been a growing share of GDP over time. A detailed breakdown of the leading service industries would include healthcare, education, and legal and financial services. It has been decades since most of the U.S. economy involved making solid objects. Instead, the most common jobs in a modern economy involve a worker looking at pieces of paper or a computer screen; meeting with co-workers, customers, or suppliers; or making phone calls.

Even within the overall category of goods, long-lasting durable goods like cars and refrigerators are about the same share of the economy as short-lived nondurable goods like food and clothing. The category of structures includes everything from homes, to office buildings, shopping malls, and factories. Inventories is a small category that refers to the goods that have been produced by one business but have not yet been sold to consumers, and are still sitting in warehouses and on shelves. The amount of inventories sitting on shelves tends to decline if business is better than expected, or to rise if business is worse than expected.

The problem of double counting

GDP is defined as the current value of all final goods and services produced in a nation in a year. What are final goods? They are goods at the furthest stage of production at the end of a year. Statisticians who calculate GDP must avoid the mistake of double counting    , in which output is counted more than once as it travels through the stages of production. For example, imagine what would happen if government statisticians first counted the value of tires produced by a tire manufacturer, and then counted the value of a new truck sold by an automaker that contains those tires. In this example, the value of the tires would have been counted twice-because the price of the truck includes the value of the tires.

To avoid this problem, which would overstate the size of the economy considerably, government statisticians count just the value of final goods and services in the chain of production that are sold for consumption, investment, government, and trade purposes. Intermediate goods , which are goods that go into the production of other goods, are excluded from GDP calculations. From the example above, only the value of the Ford truck will be counted. The value of what businesses provide to other businesses is captured in the final products at the end of the production chain.

The concept of GDP is fairly straightforward: it is just the dollar value of all final goods and services produced in the economy in a year. In our decentralized, market-oriented economy, actually calculating the more than $16 trillion-dollar U.S. GDP—along with how it is changing every few months—is a full-time job for a brigade of government statisticians.

Counting gdp
What is Counted in GDP What is not included in GDP
Consumption Intermediate goods
Business investment Transfer payments and non-market activities
Government spending on goods and services Used goods
Net exports Illegal goods

Questions & Answers

what is Marginal analysis in Economics can sameone explain to me pliss
Gary Reply
facts and proof
what matters in comsumption
money speaks sales
if marginal utility is coins then it analysis is choice of preference
what is money
Emmanuel Reply
Money refers to the exchange value of goods and services.
can you more explain it?
money is defined as any legal tender use in the exchange of goods and services.
we can say commodity. A tool of change..
Money is a tool which is use to fullfil our needs and desires in the shape of goods and services.
good definition.
how does indirect tax increase the total expenditure?
Money is any things which generally accepted as a medium of exchange by the general pubblic.
indirect tax also the part of indirect expense. when tax occure then expenses increase
I can't understand this type becousr it's difficult for me that's why could you help me
Sheikh Reply
how will demand question will be like in an examination
ekua Reply
demand supply cycle
like questions
or different types of demand
based on societal class structure
or the most common and basic demands
Give a simple explantion of the LAW OF DEMAND?
IT Reply
the law of demand says that all things been equal the higher the price the lower the quantity is demanded vise versa
As price the increases the demand decrease
Income elasticity of demand
Shaan Reply
income elasticity of demand
what is labour force
ademu Reply
Labour force is the number of people who are actively and presently working in a country to increase the availability of goods and services.
It refers to the active population available for work at a going rate.
labour force is the number of people who are active and present working in a country to increase the availability of goods and services
The law of diminishing returns States that "all other things being equal as more and more of a variable factor(labour) is employed on a fixed factor (Land) ,marginal product initially increases reaches a maximum and there after diminishes or fall
samuel Reply
how does exceptional demand occur
Esther Reply
It occurs, due to certain reasons, but to make my answers brief. Exceptional demand occurs when our earnings change. As the law of demand says the higher the price the lower the demand. However no matter how high the price is the person will still purchase the good due to his level of income.
opportunity cost definitions
What do you mean mean by opportunity cost definition?
OK thanks for the answer
Opportunity cost, means, in order to get something, you sacrifice something
Opportunity cost simply means, sacrificing one commodity at the expense of another.
A production manager should continue to use inputs until the Marginal Product (MP) reaches at zero. Justify this statement.
What is the scale of preference
The law of diminishing returns
Apply, PoE, Process of elimination, the 1st stage of production is not correct for the producer to produce because he has the option to increase his production level, so, eliminate that. In third stage, its not rational to produce because, Total output declines. Hence, it is only in the second
Stage, that the producer produces, also because, it is at this stage that the total output is maximum.
Hence proved
A production manager should continue to use inputs until the Marginal Product (MP) reaches at zero. Justify this statement.
plz help
deference b/n aggregate demand and aggregate supply
ok a production manager should continue to use it inputs until MP reaches zero because at that stage it is called rational stage. And at this stage when a producer produce anything he/she will get more output, aside that too the Total product (TP) will also be at it maximum.
Exceptional demand occurs due to demand conditions, and when it does not obey the law of demand.
A production manager should continue to use inputs until the Marginal Product (MP) reaches at zero. Justify this statement.
Newtan Reply
anyone help me Please
does the richest experience scarcity?
elan Reply
how do you master a subject
Yes, this is due to the fact that human wants are unlimited in number how ever he has everything his heart desires, he still have dreams of owning/having something else of a great value.
that's true,thank you tusajigwe
why firm maximize profits when MC=MR
Abel Reply
The night before an economic exam you decide to go for outing instead of staying at home and studying for your exam.you get 50 percent on your exam as compared with the 70 percent that you normally score.
Muhammad Reply
join me
why do banks charge fees and charges?
Shirley Reply
What is Labour
Angela Reply
the service provide by the labourer is termed as labour.

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Source:  OpenStax, Principles of economics. OpenStax CNX. Sep 19, 2014 Download for free at http://legacy.cnx.org/content/col11613/1.11
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