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  • How do you measure the size of an entire economy?

  • Let's say I buy a coffee here in London for £3.

  • Those £3 are factored into the United Kingdom's GDP.

  • And so is this barista's salary.

  • And this espresso machine.

  • In fact, most of what's around you is part of GDP.

  • GDP is an important gauge of the overall health of an economy. It stands for:

  • Gross Domestic Product

  • Simply put, GDP measures the total value of all goods and services in a country.

  • That means it measures a lot of stuff worth a lot of money.

  • Here in the U.K., GDP is around two-and-a-half trillion dollars per year.

  • In the United States, the world's biggest economy, it's around $19 trillion every year.

  • How do you get to these numbers?

  • Well, you can calculate GDP in a few different ways, but the most commonly used equation goes like this:

  • consumption plus investment plus government spending plus net exports equals GDP.

  • Let's break that down.

  • Consumption is another way of saying consumer spending.

  • It's the money you or I spend on physical goods, like coffee, and on services, like a haircut.

  • In many developed economies like the U.K. or the U.S.,

  • consumer spending makes up more than half of a country's GDP.

  • The second part of the GDP equation is investment.

  • This measures how much businesses spend on things like buildings, land and equipment.

  • It also includes a major consumer investment - buying a home.

  • Investment can take a hit when the economy is suffering.

  • You can see that in this chart domestic business investment

  • plummeted in the U.S. during the financial crisis.

  • That's because companies were trying to save money instead of

  • putting it toward things like factories, machinery and equipment.

  • Okay, now we get to government spending.

  • This is the money local, state and national governments spend on things like roads, schools and defense.

  • Government spending varies a lot depending on each country's approach to public goods and services.

  • Take for example France, where government spending amounts to roughly 56% of GDP.

  • That's compared to 41% in the U.K. and 38% in the U.S.

  • That brings us to the final part of the GDP calculation: net exports, or exports minus imports.

  • A lot of countries have negative net exports, meaning they bring in more products than they send out.

  • For example, the U.K. imports around $1 billion worth of coffee every year

  • but only exports around $315 million, meaning its net exports of coffee are negative.

  • Countries around the world collect data on consumption, investment, government spending and net exports.

  • This makes GDP a universal measurement and a way for countries to stack up against one another.

  • But it's not just the sum of the equation people look at.

  • You'll often hear about the GDP growth rate, or the percentage change in GDP over time.

  • Generally, if an economy is healthy, GDP growth expands.

  • If an economy is in bad shape, GDP growth contracts.

  • Two consecutive quarters of negative GDP growth are referred to as a recession.

  • But GDP doesn't always give a full picture of the economy.

  • Critics say the equation puts too much weight on production and manufacturing,

  • and not enough on services and the digital economy.

  • Just think of Spotify. For $10 a month you can listen to unlimited music from a huge range of artists.

  • In the past, you would have had to buy all of those albums separately, with each one contributing to GDP.

  • It's hard to factor a digital service like Spotify into the GDP equation

  • which is used to measuring physical goods.

  • GDP also doesn't measure economic equality and well-being.

  • So even if a country is really rich according to GDP, wealth may be spread unevenly.

  • Plus, GDP excludes unpaid work like volunteering for charity or child care.

  • And it doesn't factor in costs like pollution or illegal activity.

  • Some experts have come up with alternative measures to GDP

  • that measure overall happiness and quality of life.

  • But so far, none of these have stuck.

  • Maybe it's just too hard to put an economic value on that first sip of morning joe.

  • Hey everyone, Elizabeth here. Thanks so much for watching our video.

  • Be sure to check out more of your CNBC Explains over here.

  • And leave us any other ideas in the comments section.

  • Talk to you later!

How do you measure the size of an entire economy?


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GDPとは何か?| CNBCが解説 (What is GDP? | CNBC Explains)

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    April Lu に公開 2021 年 01 月 14 日