GDP is a measure of output, not monetary velocity. Only final goods and solutions matter bereason it it that worth that correlates to created value for the economic climate.




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Video Transcript

So as soon as economists are calculating the GDP at the finish of the year, they only count the final value of the products and also services produced that year or of that year s. So why don't they encompass the Trans at all the transactions that have gone on over the course of a year? Why don't they incorporate, for example, uh, the sale or the original purchase and also then sale of supplied furniture? Why don't they include the transactivity worth off? Ah, various, um, buying and also marketing on the stock industry. Well, to describe it, I'm gonna show you just how consisting of every one of those different transactions would be incorrect. So say, at the start of the year, you have a share worth $20 and also a stock issued at $1. So this chair is developed at the beginning of the year, and the stock has issued at the beginning of the year saying January. That chair is then marketed, uh, 4 $30 uh, to a person. And then it sold aget for $50. That share is not worth $30. At the end of the year. It's not worth $20. Within a year, it's worth $50 it's not worth $20 plus $30 plus $50. It's not worth $100. It's worth that $50 at the finish of the year. It's the cumulation of the complete value that's been tacked on via the multiple transactions. Same with stock sector. The stock is originally issued at $1 then the price goes all the way approximately 50. Value at that time is $50. However, if the firm does poorly and also at the end of the year, the stock drops and also is just worth $20 that stock is not worth $50. It's worth $20. GDP calculates the worth of the products and also solutions at the finish of the year. That suggests it's $50 for the chair and $20 for this stock, not the build-up of every one of it. Just those last goods and also solutions. And that's why, in that last GDP calculation for the end of the year, they only count last items and also services. They don't count the transactions done during throughout the year