Glamor Economics

Chapter 147

Chapter 19, Section 2 Effective measure of a country’s economic activity——GDP
There is a joke about GDP circulating on the Internet:
One day, two economists who were taking a walk had an argument over an issue.When it was hard to decide, I suddenly found a pile of dog poop on the grass in front of me.A said to B: "If you can eat it, I am willing to pay 5000 million." The temptation of 5000 million is really not small, should you eat it or not?B took out a pen and paper, made precise calculations, and quickly came up with the optimal solution in economics—eat!So A lost 5000 million. Of course, B's meal was not easy.

The two continued to walk, and suddenly found another pile of dog shit. At this time, B began to have severe nausea, and A also felt a little bit sorry for the 5000 million that he had just spent.So B said: "You eat it, and I will give you 5000 million." So, after thinking about it, A also came up with the optimal solution in economics-eat!A took back 5000 million with satisfaction, and B seemed to have found a little psychological balance.

But suddenly, the geniuses wailed at the same time: We got nothing after a long time of trouble, but we ate two piles of shit for nothing!They couldn't figure it out, so they had to ask their mentors.

Unexpectedly, after hearing the story of the two master disciples, Tai Dou was extremely excited. He raised a finger tremblingly and said: "One hundred million! One hundred million! My dear students, thank you, you just eat Two piles of shit contributed [-] million yuan to the country's GDP!"

It is a ridiculous thing that eating shit can create GDP. GDP stands for Gross Domestic Product.Usually, the definition of GDP is: within a certain period (a quarter or a year), the total value of the market value of all final products and labor services produced in the economy of a country or region.

In economics, GDP is often used as a general indicator to measure the comprehensive level of economic development of a country or region, which is also a commonly used measurement method in various countries and regions. GDP is the most concerned economic statistic in macroeconomics, because it is considered to be the most important indicator to measure the development of the national economy.Generally speaking, there are three forms of GDP, namely value form, income form and product form.From the perspective of value form, it is the difference between the value of all goods and services produced by all resident units within a certain period of time and the value of all non-fixed asset goods and services invested in the same period, that is, the sum of the added value of all resident units; from the form of income Look, it is the sum of the income directly generated by all resident units in a certain period of time. GDP reflects the total value added of all sectors of the national economy.

The calculation methods of GDP are usually as follows:
1.production method
The production method is a method of calculating GDP from a production perspective.From the total value of products and services produced and provided by various departments of the national economy within a certain period of time, the value of intermediate products input in the production process is deducted to obtain the added value of each department. The sum of the added value of each department is the gross domestic product. .The calculation formula is: total output - intermediate input = added value

GDP = the sum of the added value of all industries

It can also be expressed as GDP=∑Total output of each industry sector-∑Intermediate consumption of each industry sector

2.income approach
The income method is a method of calculating GDP from the perspective of income generated by each factor of production in the production process.That is, the added value of each resident unit is equal to the sum of labor compensation, depreciation of fixed assets, net production tax and operating surplus.These four items are also called the initial input value in the input and output.The sum of the added value of each resident unit is GDP.The calculation formula is:

GDP = ∑ Compensation of laborers in each industrial sector + ∑ Depreciation of fixed assets in each industrial sector + ∑ Net production tax in each industrial sector + ∑ Operating profit in each industrial sector
3.expenditure method
The expenditure approach is a way of calculating GDP from an end-use perspective and where it is used. Final use of GDP includes final consumption of goods and services, gross capital formation and net exports.The calculation formula is:

GDP = final consumption + gross capital formation + net exports
From the perspective of production, it is equal to the sum of the added value of various departments (including the primary, secondary and tertiary industries); from the perspective of income, it is equal to the sum of depreciation of fixed assets, labor compensation, net production tax and operating surplus; from the perspective of use , equal to the sum of total consumption, total investment and net exports.

[links to related words]

Gross National Product (GNP for short) refers to the final result of the primary income distribution of all resident institutional units in a country (region) within a certain period (annual or quarterly).The added value (gross domestic product) created by a country’s resident institutional units engaged in production activities is mainly distributed to the country’s resident institutional units in the initial distribution process, but part of it is also distributed to the country in the form of labor remuneration and property income. non-residential institutional units.At the same time, part of the added value created by foreign production units is distributed to the resident institutional units of the country in the form of labor compensation and property income, thus giving rise to the concept of gross national product.It is equal to the gross domestic product plus labor remuneration and property income from abroad minus labor remuneration and property income paid abroad.

(End of this chapter)