2
$\begingroup$

I couldn't find a simple answer to this question: does the dollar contribution of a service sector represent the gross profits of that sector? For instance, the GDP contribution of the financial sector of the US economy is 1.26 trillion dollars. Is that all of the profit? Or does it represent the profits + the wages paid to workers?

$\endgroup$
  • $\begingroup$ To get some basic information on GDP, you might be interested in that question: economics.stackexchange.com/q/6633/4817 $\endgroup$ – bilbo_pingouin Apr 19 '16 at 6:54
  • $\begingroup$ The Gross Value Added of a sector (essentially GDP with a tax adjustment) is basically the profits and wages in that sector $\endgroup$ – Henry Jan 31 at 8:59
2
$\begingroup$

The second way of estimating GDP is to use "the sum of primary incomes distributed by resident producer units". Gross domestic product on Wikipedia (emphasis mine)

If GDP is calculated this way it is sometimes called gross domestic income (GDI), or GDP (I). GDI should provide the same amount as the expenditure method described later. (By definition, GDI = GDP. In practice, however, measurement errors will make the two figures slightly off when reported by national statistical agencies.)

This method measures GDP by adding incomes that firms pay households for factors of production they hire - wages for labour, interest for capital, rent for land and profits for entrepreneurship.

So no, it is missing (at the very least) the wages and interest paid on the debt of the financial industry.

$\endgroup$

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.