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53 votes

Is money we make completely taken away by taxes?

No, this will not happen. Government does not tax people just for 'shits and giggles'. Governments do not hoard money at some pile as a some sort of dragon from a fantasy novel. Taxes are levied so ...
1muflon1's user avatar
  • 56.7k
20 votes

Why do we need to "get the economy moving again"?

Both Alice and Kate have bills to pay, regardless of whether they are earning money or not. Restaurants and salons have to pay rent and maintenance on their properties whether they are in business or ...
Darrel Hoffman's user avatar
19 votes

Is money we make completely taken away by taxes?

Wind the clock back in the other direction: where did this money come from in the first place? The government issued it. Render unto Caesar that which is Caesar's, etc. You've also chosen to stop your ...
pjc50's user avatar
  • 558
13 votes
Accepted

What Level of Government Debt to GDP Ratio is Sustainable?

As you have pointed out: where it comes from is very important. As to the Japanese situation it is quiet different from the US position from example. In fact most of the Japanese debt is owned by ...
Alexis L.'s user avatar
  • 593
13 votes

Why do we need to "get the economy moving again"?

Trade is good because it creates efficiency. Alice has invested in her kitchen and knows the supply chain of ingredients, and due to the efficiency of her business, she can sell a meal for $50. If ...
Nuclear Hoagie's user avatar
12 votes

Why do some news say China’s economy is bad yet still predicting its 2023 growth to be around 5 per cent?

The only time I read the word bad in the linked news article is refering to The government has set a modest GDP growth target of around 5% for this year after badly missing its 2022 goal. The ...
AKdemy's user avatar
  • 4,122
10 votes
Accepted

Is investment in real estate a real investment?

Purchasing new homes would count as an investment. According to Blanchard et al. Macroeconomics: a European Perspective pp 568 in glossary investment is defined: Investment (I): Purchases of new ...
1muflon1's user avatar
  • 56.7k
9 votes

What Level of Government Debt to GDP Ratio is Sustainable?

I don't think you can sensibly discuss this without including two additional factors: what is the prevailing interest rate? is the debt in local or foreign currency? The first affects the cost of ...
pjc50's user avatar
  • 558
9 votes
Accepted

Why does the inflation not follow the money supply?

This is because classical economic theory absolutely does not say that: inflation occurs when the money supply is increased faster than the economic growth. Even in most basic 101 models inflation ...
1muflon1's user avatar
  • 56.7k
9 votes

Is money we make completely taken away by taxes?

Your calculation is fundamentally wrong because you are forgetting an important factor - the money that government spends. In your calculation you seem to think that the 10% the government takes in ...
DJClayworth's user avatar
8 votes

Can a closed economy flourish?

It depends on what you mean by "sustained growth" and "flourishing markets". Clearly the Earth as a whole is a big market. If you do not look at human made borders: the global economy is currently ...
Giskard's user avatar
  • 29.2k
8 votes

Why do we need to "get the economy moving again"?

Let's consider another example. I'm an automotive manufacturing service engineer; I build and repair machines that are used to build and repair cars. I use the money I earn to buy a variety of things, ...
Tanner Swett's user avatar
7 votes

Why do we change the base year?

The change in base year keeps the dollar values meaningful to contemporary readers. If we still used, say, 1900 as the base year for US GDP, the dollar values for today would be so tiny they would ...
Jonathan Cast's user avatar
7 votes
Accepted

How is the GDP growing when nothing else seems to be?

There's a bit to unpack here. Consistent wage growth seems in line with rising GDP. So does a steadily falling unemployment rate. For other economic measures, the stock market is a whole other ...
Kitsune Cavalry's user avatar
  • 6,638
7 votes

Why do we need to "get the economy moving again"?

Most people aren't Alice and Kate. GDP is a measure of the total goods and services produced within an economy. The point is measuring total production, not measuring how much money is changing hands....
reirab's user avatar
  • 430
6 votes
Accepted

Why is machine built this year but not sold this year included in GDP?

The comment provided by @Kitsune Cavalry: It counts as investment. Inventory, capital, and structures are part of investment. Unsold stuff counts as inventory. is correct as to the accounting; let ...
dismalscience's user avatar
6 votes
Accepted

Is there an alternative metric to GDP that measures a country's assets rather than flows?

You are correct in pointing out the flaws of GDP. But honestly, it's the best we have came up with; measuring the stock of wealth is just impossible. You say you can estimate the value of your own ...
Ulises Genis's user avatar
6 votes

Why are "transfer payments" not part of GDP?

Transfer payments aren't included in GDP to prevent double-counting. The reason the author's question is troubling you is because the answer externalizes everything that happens after the payment ...
Michael's user avatar
  • 196
6 votes
Accepted

How can I best estimate a company's contribution to GDP?

As a comment noted, value-added is the way to go. And how do we measure value added at the level of an individual firm? It is $$\text{Value-added} = \text{Wages and Salaries incl. Insurance}+\text{...
Alecos Papadopoulos's user avatar
6 votes
Accepted

How would gross world product look like if fossil fuel is treated as capital and not as income?

There is a large literature considering the depletion of natural resources, including fossil fuels, in relation to GDP. Some writers explicitly refer to such resources as a kind of natural capital. ...
Adam Bailey's user avatar
  • 8,489
6 votes
Accepted

Can an unprofitable company increase GDP?

You are correct in suspecting that this firm produces no added value, but this does not contradict your definitions. We sum up the cost of salaries and retained earnings of all firms in the economy [...
Giskard's user avatar
  • 29.2k
6 votes

GDP doesn't add up in FED data - why?

It is because you are using wrong data, in fact the two series you plot never overlap save for some crossing points, and given you are using wrong datasets its actually weird why they follow each ...
1muflon1's user avatar
  • 56.7k
6 votes

Is money we make completely taken away by taxes?

A distinction must be made, as also other answers suggest, between money and income. If you speak of money, meaning the amount of money you have at some instant of time, and with which you pay taxes ...
BakerStreet's user avatar
  • 3,802
5 votes
Accepted

Do the donated NFL losing team shirts destroy local economies?

My answer is no, it doesn't hurt the local economy. This seems like an example of the "Broken Window Fallacy": Suppose, when nobody is looking, I break all of the windows in my neighbour's house. ...
Ubiquitous's user avatar
  • 16.9k
5 votes
Accepted

Are goods that are wasted counted into the GDP of a nation?

It may depend on when they are wasted: yes if a consumer purchases them, as it does not matter whether they are eaten or thrown away rotten from the consumer's cupboard (except on the consumer's ...
Henry's user avatar
  • 4,765
5 votes
Accepted

Why doesn't anyone talk about GNW (Gross National Wealth)?

Historically, the distinction between GDP and GNW goes back (at least) to Adam Smith. Before Smith, it was quite common to measure a country's economic power by its wealth. For example, this was very ...
eigenvector's user avatar
5 votes
Accepted

Do outputs of a country produced outside its borders contribute to its citizens' well-being?

GDP stands for Gross Domestic Product: this is the amount of activity that happens within the borders of the country itself, irrespective of source. What you are thinking of is GNP: Gross National ...
serakfalcon's user avatar
5 votes
Accepted

GDP simple question got me confused: the sale of a capital asset

No, the sale of a capital asset doesn’t count in GDP, as the cost of the asset was already accounted for when the plane was first sold to Delta. To your second point, if a broker somehow provided a ...
dismalscience's user avatar

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