Mindful Economics by Joel Magnuson

Author:Joel Magnuson
Language: eng
Format: epub, mobi
Publisher: Seven Stories Press
Published: 2010-06-11T04:00:00+00:00

GROSS DOMESTIC PRODUCT

Gross domestic product (GDP) is a measurement of the dollar value of all finished goods and services produced and distributed in the economy. The GDP of the United States is calculated on an annualized basis by the U.S. Department of Commerce and, as of this writing, is approximately $11.6 trillion. 80 This figure indicates that over the last year the U.S. generated $11.6 trillion worth of finished goods and services.

To arrive at the GDP figure, the Commerce Department’s Bureau of Economic Analysis (BEA) compiles data from a variety of sources on production, income, prices, and spending. The BEA keeps track of these figures in National Income and Product Accounts (NIPAs) and makes quarterly estimates on overall production and income in the U.S. economy. These estimates are revised as new data is collected and analyzed, then quarterly GDP statements are published monthly in the Survey of Current Business. Every July, the BEA revises its estimates for the previous three years and after the final revisions, the GDP statistics are fixed as historical records.

The BEA uses total spending in the U.S. economy as its primary measurement of overall production and income. This is based on the idea that there are two sides to every transaction in which a finished product is bought and sold. On one side of the transaction, money is spent by a consumer and on the other side a dollar value of output is sold by the producer. As the producer sells the product at its market value, he or she is also receiving income. By measuring spending in this way, economists are also measuring output and income. That is, spending, output, and income are three dimensions of the same thing.

In its quarterly statements, the BEA presents GDP in the form of “outlays” arranged into four broad categories: Consumer Spending, Investment Spending, Government Spending, and Net Export Spending—the balance between exports and imports. Table 1 shows 2007 GDP data as it broken down into these categories.

TABLE 1

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