Outputs – GDP
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The outputs of any nation are the many different products and services produced by its many different sectors
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The only way to measure them all together is to convert them all into a single measure of total economic activity – Gross Domestic Product
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GDP is variously defined as:
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The value of all final goods and services produced in a given year, or
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The total expenditure on all finished goods and services, or
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The value added in the production of goods and services, or
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The corporate and personal incomes generated by this production
GDP= C + I + G + (X – M)
- C = Private consumption of final goods and services
- I = Investment, public and private, in new buildings, highways, ports, plant, equipment and IT
- G = Government spending – public sector pay, investments, purchases of weapons etc – but not ‘benefits’
- X – M = Net exports = Exports less imports
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The alternative to GDP for measuring national output is GNP
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GNP = Gross National Product = GDP + net income from foreign investments:
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GNP is thus a more complete picture of total national income
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Some say the UK’s wealth inheritance over many decades has been used to buy assets abroad which now provide a healthy extra income for the nation – others say this might actually be negative
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Either way, we’re more concerned with the outputs and outcomes produced by inputs from within our national boundary, so we prefer to use GDP as our national output measure
