Components of GDP
Components of GDP Understanding the components of the expenditure view of GDP. Consumption, investment, government spending and net exports
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- What I want to do in this video is take an expenditure view of GDP
- So we can think about how GDP can be counted, measured, and how active the different parts of an economy are.
- So GDP- the market value of all final goods and services produced-not just changed hands-produced
- within a country in a given period.
- And the symbol we use for GDP and I don't know why-but the symbol is "Y"-Y is the GDP
- And so let's think about it from an expenditure point of view.
- Think about what are all the pieces?
- If were thinking of expenditure for all the players that might...
- have spent money on the final goods and services that were produced in our country
- Well you could have your firms
- The firm's mother spend money on these goods and services
- You also have your households, they obviously could've spent
- some money on goods and services produced in this country.
- Then you also have, you also have in fact
- in all countries you have the government, the government could've spent money
- on the goods and services produced in this country, and
- if we assume that we are trading with other countries, there are other countries
- that might've spend money on the goods and services, other
- outside...let's just write foreign
- people outside the country money to spend money on goods and services
- so foreign purchases, and another way to think about it
- would've been this is exports
- our country is exporting its people outside of the country and they're purchasing it, now this is almost complete
- but if we look at all of the money that firms are spending, all the money that households are spending,
- all the money that governments are spending. Some of it that they are spending might not
- be on goods and services that are produced in this country, they might be spending some of the stuff on
- things that are produced outside of this country so we would have to subtract it out if we really
- wanted to have goods and services produced within the country, so what we're gonna want to do is subtract out foreign products
- or another way of thinking about it, the typical way of thinking about it..we would subtract imports
- So if you think about it all of the goods and services that meet these classifications, the final goods and services
- produced in the country in a given time, that firms spent money on and add that to the good and services that households spent money on
- and add that to the goods and services that the Government spent on, and all the goods and services-the exports-and
- make sure we're not counting the goods and services that other countries produce so we subtract those out
- this would give you a pretty good measure of all the goods and services produced within a country
- and this is pretty close to the way that economists actually do measure it, so what they do is say
- Y is equal to "Investment", and we saw in the previous video investment in the macroeconomics term isn't quite what it is in the everyday term
- It really essentially means the spending by firms, so pretty much everything that the firm spends
- In theory you're spending that money to make future goods and services or to make goods and services, so
- that's all considered investment and a little bit of the household spending is considered investment, just new houses
- but the bulk of household spending is considered to be consumption, and then everything that the government spends on
- whether it's the military, and all the salaries for police people, and whatever they do...the grounds-keeping at the White House
- whatever else if you are thinking about the U.S. That goes straight to "G". And over here you have foreign exports minus
- foreign inputs so you have exports minus imports so you could view this is a net exports
- if this number is positive then net exports are positive and we're exporting more than we're importing, if this number
- is negative, net exports is negative that means we are importing more than we are exporting but in a traditional
- expenditure-view of GDP this whole part right over here will be referred to as net exports
- and so you sum up these things which are very closely related to the more intuitive versions we started off with
- then you essentially have broken down the expenditure-view of GDP in the traditional sense
- In the next two videos I'm going to start thinking of a bunch of different examples and we'll think of which bucket it would fall into
- and how it would affect one of these buckets.
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At 5:31, how is the moon large enough to block the sun? Isn't the sun way larger?
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