Components of GDP

what I want to do in this video is take an expenditure view of GDP so that we can think about how GDP could be accounted for how it can be measured and how we can see what the how active the different parts of an economy actually are so GDP 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 why why is GDP and so let's think about it from an expenditure point of view expenditure point of view to think about what are all the pieces well if we're thinking about expenditure who are all of the players that might have spent money on goods and services on final goods and services produced in our country who are all the people that might have done it well you could have your firm's the firm's might have spent money on these goods and services produced in a country you also have your households they obviously could have spent spent some money on goods and services produced in this country then you also have you also have in most countries in fact in all countries you have the government the government could have spent some of the money on the goods and services produced in this country and if we assume that we're trading with other countries there are other countries that might have bent money on goods and services other outside so let's just write foreign people outside of the country might have spent money on goods and services so foreign foreign purchases and another way to think about this would have been this is this is exports our country is exporting it to people outside of the country and they are purchasing it now this is almost complete but if we looked at all of the money that firms are spending and all the money that households are spending and all the money that governments are spending some of what they're spending might not be on goods and services that are produced in this country they might be spending some of their stuff on things that are produced outside of this country so we would have to subtract it out if we really want to have the goods and services produced within the country so what we're going to want to do is subtract out what foreign products foreign foreign products or in products or another way that a more typical way of thinking about it we would subtract out imports so if we think about all of the goods and services that meet these classification the final goods and services produced in the country in a given time produced spent that firm spent money on and add that to all the goods and services that households spent money on and I'll add that to the goods and services government spent on and all the goods and services that were purchased by foreigners the exports and then 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 of the goods and services produced within a country and this is pretty close to way the economists actually do measure it so what they do what they do is they say Y is equal to investment investment and we saw in a previous video investment in the macroeconomics term isn't quite what it means in the everyday terms it really essentially means the spending by firms so pretty much everything that a firm spends in theory they're spending that money to make future goods and services so or to make goods and services so that's all considered investment and then there's a little bit of household for a little bit of the household spending is considered investment and that is just new houses new new houses but the bulk of household spending is considered to be consumption is considered to be consumption 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 and and you know whatever they do you know the the groundskeeping of at the White House whatever else if we're thinking about the US that it that goes straight to gee government spending and this thing right over here you have foreign purchases exports minus foreign imports so you have exports minus imports so you could view this as net exports net exports if this number is positive the net exports are positive we're exporting more than we're importing if this number is negative next net exports is negative that means we're importing more than we are exporting but in the traditional expenditure view of GDP this whole part right over here will be referred to as net exports net net exports and so you sum up these things which are very closely related to maybe the slightly more intuitive versions that we started off with and you essentially have broken down the expenditure view of GDP in the traditional sense and in the next few videos I'm going to start thinking of a bunch of different examples and we'll think about which bucket it would fall into or how it would affect one of these buckets