4
$\begingroup$

I'm a total noob. Please be kind. :)

GDP is only calculated using "end products". This seems terribly difficult to me. For example, is a truck an end product or a method for production? If I'm driving myself and my family around, then it seems like an end product. But if I'm using it on my farm, then it doesn't.

How about a computer? If I'm using it to play video games, then it seems like an end product. But if it's used in a hospital to manage medical records, then it seems like an intermediate product.

How are these multiple uses taken into account with GDP?

I want some metric that is the total amount of goods produced (regardless of whether or not the good produced is an end product or not). What is the best metric for this?

Thank you!

$\endgroup$
4
$\begingroup$

You’re looking for gross output; GDP is final output.

Per the BEA:

Economy-wide, real gross output—principally a measure of an industry's sales or receipts, which includes sales to final users in the economy (GDP) and sales to other industries (intermediate inputs)

For calculation purposes, it’s generally assumed that a firm purchasing a good (for example, a computer) is using it as an intermediate input, while a household purchasing the same good is using it as consumption (so it’s a “final sale” counted in GDP), though corrections are applied in particular cases where this assumption doesn’t hold well. Cases where households act as producers, like farms and real estate, are prime areas for these corrections.

$\endgroup$
  • 1
    $\begingroup$ Thank you!!! It's remarkably difficult to Google for some of these things. Thank you for a valuable answer. $\endgroup$ – NicNic8 Apr 20 at 20:29

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.