GDP = Gross Domestic Production right?

Discussion in 'Economics' started by noob_trad3r, Jul 16, 2010.

  1. CNBC keeps harping about 70% of our GDP being consumers buying.

    But how is consuming = production??

    if 70% of consuming chinese good (we do not make this stuff)

    Why then include consumers buying in our GDP calculation.
  2. This is known as an expenditure method of calculating GDP. It includes a term for (exports - imports), which should address your concerns over where the sh1t that Americans consume actually gets made.

    Generally, I think you'll find that useful basic macroeconomic knowledge is available on the Internet. You can use the wonderful Google search engine. It really works :)!
  3. Martin you bitch. There are two other ways to measure the output can you name them?

    No googling.
  4. Hahaha, was my comment too snide?

    At any rate, I don't remember exactly, but I think one of them is the production method. Don't remember the name of the other one.
  5. I think it is income but there may also be a supply one. There is definitely one that uses c + s + t + r instead of c + i + g + e.

    Why do we use that one any way. I think that was the query.
  6. Nah, I think the question is how to deal with consumption of things that are actually produced elsewhere. I simply pointed out that the expenditure approach obviously accounts for that. In general, there's a fundamental assumption that you cannot consume something that has not been produced somewhere. I struggle to see conditions under which this assumption would be violated.
  7. In any event I think the GDP of western countries is held up by reserve currency status. The demand for the currency as a safe investment vehicle makes the currency artificially high and enables them to buy enormous amounts of goods cheaply. The makes the GDP hyped.
  8. jem


    would not the demand for currency be offset by the supply of currency.

    And would the demand vs. supply equation be balanced out by floating currencies and the electronic creation and exchange of currency?
  9. The assumption that spending 1 dollar means 90 cents of that spending is from something produced here is an incorrect assumption.

    More accurately would be to say for ever 1 dollar spent in the US, 80 cents probably goes to china,india,mexico and we keep 20 cents in the US in assorted support jobs etc.

    Which means we have to borrow (hence the huge trade deficit in the united states)

    This is not sustainable in the long term, now when will this become a problem I cannot say? At some point we need to pay back what we have borrowed.

    In the 1950s I bet every dollar consumed, 95% probably stayed within the United states.
    #10     Jul 16, 2010