Does each company have economists who calculate GDP or is it done by the government? • (14 votes) GDP is calculated on a quarterly basis (every 3 months) and presented in the National Income and Products Accounts (NIPA) by adding up both the total expenditures of the country and the total income of the country through double entry accounting. The NIPAs report two numbers (though theoretically they should be the exact same because income = expenditure), that reflect the total value of all expenditure or income in those 3 months multiplied by 4, and adjusted for seasonal differences between the different times of year. NIPAs are published by the Bureau of Economic Analysis of the Department of Commerce. So yes it is the government. As to your second question, the government can differentiate between intermediate and final products by looking at who the goods are being sold to. As a general rule, if the goods are being sold to a firm, then it is an intermediate product and if they are being sold to households then they are a final product. You have to be careful with the firm side of things though because the products being sold to firms could also be considered investment if the product is capital (such as a piece of machinery). An example of this would be the production of a car. A car manufacturer buys materials such as metal, leather, plastic, etc. to be used in the production of the car. The purchase of these materials by the manufacturer would not be counted in the GDP because they will be directly used in the production of their new car. The value of these materials will be incorporated into the final cost of the car when the manufacturer sets his price and when the new car is sold to a consumer, we count the final cost of the car in GDP. This cost of the car would then include labor, raw materials, and whatever intermediate products that went into its production. I know this was long-winded, but I hope it helps! (47 votes) Wait so I'd like to clarify something. Initially the household expenditure (HH exp) on goods and services was considered a way to measure GDP. This was HH exp = Revenue (by firms) = Profit+ Investments(wages/rent etc). If each of these are good measures of GDP then won't adding them all together create duplicates as we do in this "Expenditures equation" for GDP? It appears here we are adding Firm investments and HH consumption on goods and services together which doesn't make sense to me. Clarification would be most appreciated. • (23 votes) The question to be asked is - "If GDP is the total expenses in an economy, then who are all incurring those expenses?" (11 votes) if example Apple makes its ipads in China and then sells it in US.Are the ipads considered imports? • (11 votes) Yes, a certain portion of the final sale price of the iPad is counted in imports(M), but the retail sale amount is added in Consumer goods and services(C) (12 votes) When was the last time the USA had a positive "net export" for the year? • (5 votes) In 1975, http://usinfo.org/enus/economy/trade/docs/06s1288.xls. (14 votes) so BMW's that are bought in America are assembled in BMW factories in South Carolina. The parts for assembly are made in Germany. Thus, since BMW is foreign car company, would American BMW purchases go toward GDP? • (3 votes) A guess here: The parts would be considered imports, but the assembled car would be household consumption. It's likely that the price paid for the car would be marked up over the cost of the parts, and since this model views GDP as the market value of products, that markup would add to the GDP even after the value of the parts are removed by subtracting imports. (13 votes) At • (2 votes) This is a common misconception for students, since people frequently use the word "investments" to refer to such financial assets transactions. In formal macroeconomics teaching, however, any such transactions -- even by a company -- are not considered Investment for GDP purposes, as they are not actually purchasing final goods or services used "to make future goods and services". The financial transactions are instead simply transferring money (in some form) between two entities. (8 votes) Why we add exports? Isn't it our income? I thought that import is our expenditures and therefore when calculating GDP by expenditures we should add import and subtract export. • (4 votes) GDP is the market value of everything that was produced within a country in a year or any other given period of time. It is not the value of expenditures accumulated by the people of the country. It is the value of all the goods and services that were produced within that country. When we import, we use our money to buy goods that were produced in other countries (contributing to those other countries' GDP). When we export, we sell goods and services that were produced in our country to the interested party of another country. That is the reason why we subtract total imports from exports. Think of it as a leakage and injection of value of goods, not money :) (6 votes) What about wages, do wages, that firms are paying to employees, are included into Investment (3'20" on the video) ? Thanks • (2 votes) There are different methods of computing GDP. In this method, no, wages are not counted, because this wages later are used by employees to consume final goods, if it included, that would have been double counting. The only exception is when the employee works for government. Then his/her salary is counted as government expenditure. (7 votes) I'd like to re-ask a question because it isn't clear to me yet. For a firm, the wages it gives to its laborers + land rent etc, are they counted as investment or expenditure? • (2 votes) Wages, land, and rent for a firm are all expenditures in the form of investments. They are all things that are bought in order to produce a final good. (4 votes) Do private schools count as firms? • (2 votes) Yes, a private school is an organisation providing educational services with the aim of making a profit so that would be defined as a firm. (2 votes)Want to join the conversation?
And if it is done by the government how do they know what is the value of products which are only intermediate stages of other products? 
In the earlier model all the consumption was done by households only. But in reality firms do spend some money on the things they need to produce. They spend money mainly on two types of goods and services: 1. For raw materials for producing the current products: which is accounted in the household consumption as a final product
2. For equipment and other resources: Which is an investment and also an expenditure, hence counted.
Since then the absolute value of the negative net exports was growing constantly, especially during booms, and there were some reductions during recessions. Actually, it's not that bad, because, as far as I understand, it indicates about higher standards of leaving in the US. For instance, if USA wants to import Chinese furniture, it's not because Americans cannot produce furniture, but because the salaries in China are much lower, so it's chipper to produce it in China and to be consumed by Americans with lower price that as if it were produced in the USA. But of course the question is not that simple, there are also downsides of negative net exports.
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Video transcript
What I want to do in this videois take an expenditure view of GDP, so that we can thinkabout how GDP can be accounted for, how it can bemeasured, and how we can see how active thedifferent parts of an economy actually are. So GDP, market value of allfinal goods and services produced, not justchanged hands, produced within a countryin a given period. And the symbol we use forGDP, and I don't know why, but the symbol is Y. Y is GDP. And so let's think about it froman expenditure point of view, to think about whatare all the pieces. Well, if we're thinkingabout expenditure, who are all of the playersthat might have spent money on the goods and services,on final goods and services, produced in our country? Who are all the peoplethat might have done it? Well, you could have your firms. The firms might have spent moneyon these goods and services produced in a country. You also have your households. They obviously could'vespent some money on goods and servicesproduced in this country. Then you also havein most countries, in fact in all countries,you have the government. The government could havespent some of the money on the goods and servicesproduced in this country. And if we assume that we'retrading with other countries, there are other countriesthat might have spent money on goods and services. Other, outside, so let'sjust write foreign. People outside of the countrymight have spent money on goods and services,so foreign purchases. And another way tothink about this would have been this is exports. Our country is exporting it topeople outside of the country and they are purchasing it. Now, this is almost complete. But if we lookedat all of the money that firms are spending and allthe money that households are spending and all the moneythat governments are spending, some of what they'respending might not be on goods and services thatare produced in this country. They might be spendingsome of their stuff on things that are producedoutside of this country. So we would haveto subtract it out if we really want to have thegoods and services produced within the country. So what we'regoing to want to do is subtract outforeign products. Or another way, the more typicalway of thinking about it, we would subtract out imports. So if we think about all ofthe goods and services that meet this classification,the final goods and services produced in a countryin a given time, that firms spentmoney on, and add that to all the goods and servicesthat households spent money on, and add that to all the goodsand services that government spent on, and all the goods andservices that were purchased by foreigners, theexports, and then make sure we're not countingthe goods and services that other countries produce--so we subtract those out-- this would give you apretty good measure of all of the goods and servicesproduced within a country. And this is pretty close tothe way the economists actually do measure it. So what they do is they sayY is equal to investment. And we saw in a previousvideo, investment in the macroeconomicsterm isn't quite what it means inthe everyday term. It really essentially meansthe spending by firms. So pretty much everythingthat a firm spends in theory, you're spending that money tomake future goods and services, or to make thegoods and services-- so that's allconsidered investment. And then a little bit ofthe household spending is considered investment. And that is just new houses. But the bulk ofhousehold spending is considered to be consumption. And then everything thatthe government spends on, whether it's the military andall the salaries for police people and whateverthey do, you know, the groundskeepingat the White House, whatever else, if wethinking about the US, that goes straight to G,government spending. And this thingright over here, you have foreign purchases,exports, minus foreign imports. So you have exportsminus imports. So you could viewthis as net exports. If this number is positive,the net exports are positive. We're exporting morethan we're importing. If this number is negative,net exports is negative. That means we are importingmore than we are exporting. But in traditionalexpenditure view of GDP, this whole partright over here will be referred to as net exports. And so you sum up these things,which are very closely related to maybe the slightlymore intuitive versions that we started offwith, and you essentially have broken down theexpenditure view of GDP in the traditional sense. Then in the next fewvideos, I'm going to start thinking of abunch of different examples. And we'll think about whichbucket it would fall into or how it would affectone of these buckets.
As an expert in economics and GDP calculation, I can provide a comprehensive overview of the concepts discussed in the article. The individuals in the conversation are seeking clarification on how GDP (Gross Domestic Product) is calculated, who is responsible for the calculation, and how specific economic activities contribute to GDP. Let's break down the key concepts discussed in the article:
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GDP Calculation and Responsibility:
- The government is responsible for calculating GDP. This is mentioned by Alex, who explains that GDP is calculated on a quarterly basis and presented in the National Income and Products Accounts (NIPA) by the Bureau of Economic Analysis of the Department of Commerce.
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Components of GDP:
- GDP is the market value of all final goods and services produced within a country in a given period. The conversation identifies different players or components that contribute to GDP through expenditures:
- Firms: They spend money on goods and services produced in the country, contributing to investment (considered spending for future goods and services).
- Households: They spend money on goods and services, with a distinction between consumption and investment (e.g., purchasing new houses).
- Government: Government spending, including expenditures on military, salaries, and other services, contributes to GDP.
- Foreigners: Purchases of goods and services by people outside the country (exports) contribute to GDP.
- GDP is the market value of all final goods and services produced within a country in a given period. The conversation identifies different players or components that contribute to GDP through expenditures:
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Net Exports:
- The difference between exports and imports is referred to as net exports. If positive, it indicates that the country is exporting more than importing, and if negative, it means the opposite.
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Intermediate and Final Products:
- Alex addresses the distinction between intermediate and final products. Goods sold to firms are considered intermediate products, while those sold to households are final products. Care is needed in the case of goods sold to firms, as they might be considered investments if they are capital goods.
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Imports and Exports:
- Nathan Pardede raises a question about BMWs assembled in the U.S. with parts made in Germany. Erik Hagen suggests that the parts would be considered imports, but the assembled car contributes to household consumption, thus adding to GDP.
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Private Schools and Firms:
- Benson Chiang asks if private schools count as firms, and Matthew.Hubbard123 confirms that a private school is considered a firm, providing educational services with the aim of making a profit.
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Wages and Investments:
- Saxet clarifies that in GDP calculation, wages paid by firms to employees are not counted as investments, except when the employee works for the government. Wages used by employees to consume final goods are not counted to avoid double counting.
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Net Export Trends:
- In response to a question about the last time the U.S. had a positive "net export," saxet mentions 1975 and explains that the trend has generally been negative, with some reductions during recessions. Negative net exports may indicate higher living standards but involve complexities in global trade dynamics.
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Expenditure View of GDP:
- The video transcript discusses the expenditure view of GDP, breaking it down into components such as investment, consumption, government spending, and net exports.
By integrating these concepts, one can gain a comprehensive understanding of how GDP is calculated, the role of different economic agents, and the nuances involved in distinguishing between various types of economic activities.
