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Gross Domestic Product (GDP)

How do we measure the health of an economy? The most common way is by looking at its gross domestic product, or GDP. But what does that mean exactly? Are there any limitations to this approach? What kind of goods are counted towards GDP? Let's dive into some specifics.

Script by Matt Beat:
Animation by Ignacio Triana:

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26 COMMENTS

  1. Wonderful explanation of GDP, in all of its various forms. One issue with GDP, at least when used to gauge the health of an economy, is that it fails to take into account what it costs to produce a finished good. This is why some economists also contrast GDP with a nation’s (or a state’s) debt (since people, businesses, and governments often borrow money to operate and produce finished goods). Going back to the Germany v. China example, Germany’s GDP per capita is over 4 times that of China’s, which suggests that at the person living in Germany is much better off than China. Moreover, at the end of 2022 Germany’s national debt was around 65% of its GDP, while China’s was only around 45%. Compare either of those the U.S.’s, which is around 123%. When viewed through this lens, while the U.S. may seem like the strongest economy in the world, by GDP, it’s actually quite fragile given the enormous amount of borrowing we’ve done to produce our final goods.

    PS – this also explains why it seems like the U.S. is almost always facing a “debt crisis” and our rate of small business and personal bankruptcy is far higher than in most other western countries.

  2. Hello Prof Dave. I work as a mess attendant at a marine base and well. I started my journey into science around 12 despite it really being about “lay level” well recently, an analytical chemist heares me speaking to a friend about atomic structure and how atoms line up to form structure like graphene or in crystals or well.. everything, really. He offered my a free tutorship for free about chemistry
    And I just have to say thank you to you your videos added to my tiny pool of knowledge. I am very happy to have come across your videos and learned to expand my learning in the areas.

  3. Brief videos with high information density. Smart! Direct appeal to today’s consumer. As an aside, there are 7 dislikes as of the time of my comment. I really can only imagine two different kinds of people who would take the time to click the dislike button: 1. _Leftovers from victims of Dave’s debunking videos_ or 2. _Trolls who have nothing better in life._ In either case, *pathetic.*

  4. I’d like to add that the inequality also applies to the per capita and therefore may not be a perfect indicator either. if a disproportionate amount of the GDP goes to a small wealthy elite (as was mentioned) then the average citizen of a country will make significantly less then GDP per capita suggests as a result.

  5. Took economics 46 yrs ago in college, didn’t understand it then, still don’t despite trying
    just seems divorced from reality. Have you heard of Kate Raworth’s “Doughnut Economics”
    look’s like not only is it easier to understand, but also more grounded in reality.

  6. What if american businesses start a business offshore? Is those goods produced given the american gdp or the offshore countries gdp?

  7. Why the national debt is not deducted from the Gross Domestic Product.
    It turns out that the statistics are not objective.
    It seems to show that there is production, but in fact it is in debt to the ears.

  8. :50 secs, Question: lets say I’m not a baker and I purchase these same items to bake a cake (not to sale). Is it now considered a final good? and how is that acknowledged in the GDP?

  9. Hi professor
    May i know why rewarding a super performance workers reward and air pollution affect the GDP Calculation

  10. 00:12 GDP measures the total value of goods and services produced within a country’s borders.
    01:00 Differentiating between intermediate goods and final goods
    01:48 GDP counts only final goods and production within a country’s borders
    02:31 Gross Domestic Product (GDP) represents the total cost of all goods and services produced in a country.
    03:19 Real GDP is a more accurate measure of economic growth
    04:10 GDP doesn’t measure underground economy, negative externalities, and leisure time.
    04:58 GDP doesn’t account for distribution of goods and services
    05:51 Gross domestic product (GDP) remains the primary way to quickly measure the health of an economy

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