How is GDP calculated, which exceeds 12.6 trillion yuan? - Huxiu.com#
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This article introduces the concept and statistical methods of GDP, and explains how to judge the economic situation of a country. At the same time, the article also mentions that China's GDP exceeded 12.6 trillion yuan in 2023.
• 💰 GDP is an indicator that measures the economic situation of a country by calculating the market value of final goods and services.
• 🌍 GDP only counts the production value within the geographical scope of a country and does not include imported goods and services.
• 📈 China's GDP in 2023 grew by 5.2% compared to the previous year, exceeding 12.6 trillion yuan.
According to the preliminary calculation of the National Bureau of Statistics, calculated at constant prices, China's GDP in 2023 grew by 5.2% compared to the previous year, with a total GDP of over 12.6 trillion yuan!
What does 12.6 trillion yuan mean?
If we use 100 yuan banknotes to measure, 12.6 trillion yuan weighs 1.449 million tons, which is roughly equivalent to the weight of 9,663 adult blue whales, the largest animal in the world!
Today, let's understand GDP.
First, let me ask you a question: How do you judge whether a person's economic situation is good or bad?
Well, generally speaking, the higher a person's income, the higher their standard of living and the better their economic conditions.
The same applies to judging whether the overall economic situation of a country is good or not.
Yes.
Let's approach it from a different perspective: the reason why we can earn income is because we "sell" something, which can be tangible goods or intangible services.
Each sale is a transaction, and every transaction involves two parties, the seller and the buyer.
The seller earns income through the transaction.
For an overall economy, all income ultimately comes from the expenditure of certain individuals. In other words, the income of all sellers must be equal to the expenditure of all buyers.
Therefore, to measure the income situation of all individuals in a country, we only need to calculate the corresponding expenditure, which is used to purchase goods and services.
Using currency to measure the market value of these final goods and services, we can roughly determine the economic situation of a country.
Based on this logic, there is an indicator that measures the economic situation of a country, called Gross Domestic Product (GDP), which is defined as follows:
To deepen our understanding, let's break down the concept of GDP.
I. What is a specific period?
GDP measures the value of production within a specific period, usually a year or a quarter.
Transactions of things that are not produced during this period are not included in the GDP of that period.
For example, cars produced in the current year are included in the GDP of that year, but the sale of used cars is not included; the same goes for the sale of second-hand houses, as they are not produced in the current year.
II. A country
The production value measured by GDP is limited to the geographical scope of a country.
For example, if a foreigner works in China, their output is part of China's GDP.
Similarly, if a Chinese person works abroad, their output is not included in China's GDP.
Therefore, as long as an item is produced within a country, regardless of the producer's nationality, it should be included in that country's GDP.
III. How to calculate final goods?
GDP measures the value of final goods, which refers to the products produced within a certain period that are no longer processed, and can be consumed and used.
Here, although Liu Bei and Zhuge Liang had a transaction, the bundle of grass was a raw material for making shoes, which is an intermediate good, so the expenditure on buying grass is not included in GDP.
But if Zhuge Liang sells the bundle of grass directly to Guan Er Ye to feed the horse, the grass becomes a final good, and the expenditure on buying grass needs to be included in GDP.
GDP only counts final goods and does not count intermediate goods to avoid double counting. The value of intermediate goods is already included in the price of final goods.
However, there are also special cases. For example, in the above example, although Liu Bei bought grass, he regarded it as inventory and did not use it directly, intending to make grass shoes the following year.
At this time, the grass is not considered an intermediate good, but a "final" good for that year, and the expenditure on buying grass is included in that year's GDP.
When the grass is made into grass shoes and sold in the second year, the value included in GDP needs to deduct the portion that was included as inventory at that time, which also prevents double counting.
IV. Items and services not included in GDP statistics
GDP does not include things produced and sold illegally, such as drugs.
GDP also does not include things that have not entered the market for sale, such as goods and services produced and consumed within households.
Let's take an example: massage services are charged, and the expenditure on massages by customers should be included in GDP.
But if the massage therapist and the customer develop a relationship and get married, and the massage therapist provides massage services again, it is no longer included.
The above-mentioned items or services are difficult to measure because they have not entered the market, so they are not included in GDP statistics.
Now that we understand the concept, let's take a look at how to calculate GDP.
V. How to calculate GDP?
Now we know that for an overall economy:
Therefore, there are three methods to calculate GDP, which are:
A. Production approach
This method calculates GDP based on the market value of output goods and services.
This is equivalent to summing up the value added.
B. Income approach
This method calculates GDP from the perspective of income generated in the production process, which is the sum of income distribution among different entities after the sale of goods and services.
C. Expenditure approach
Let's focus on this method. First, let's introduce the identity equation for calculating GDP using the expenditure approach:
Let's derive how this equation is obtained.
The goods and services produced in a country can be sold to domestic buyers and also exported to foreign buyers.
What is net exports?
Let's take an example: Let's compare corn to domestically produced goods and services. Corn can be sold to three types of buyers:
Similarly, goods and services produced abroad can also be imported into our country. Let's compare bananas to foreign goods and services, which can also be sold to three types of buyers:
The so-called net exports is equal to the expenditure of foreign buyers on domestically produced goods and services minus the expenditure of domestic residents on foreign goods and services. In simple terms, it is the difference between exports and imports.
When we calculate consumption, investment, and government purchases, we actually include both domestically produced goods and services and imported goods and services.
But as mentioned earlier, GDP is limited to goods and services produced within a country's geographical scope, including those exported, but not those imported.
How do we remove these imported items?
Coincidentally, the net exports formula includes the "negative item" of foreign imports. By adding the four types of expenditures, we can eliminate the imported items, and thus obtain:
In this way, we can derive the identity equation for calculating GDP using the expenditure approach.
Finally, let's summarize today's content:
In short, GDP can represent the degree of economic prosperity and the economic situation of a country. There are many other aspects involved, which we will discuss in the future.
In any case, the GDP in 2023 shows that our national economy is recovering and improving.
As usual, here's a fun fact:
According to the data released by the National Bureau of Statistics, the population of China at the end of 2023 was 1.40967 billion, a decrease of 2.08 million compared to the end of the previous year. In terms of gender composition, there were 30.97 million more males than females.
In terms of age composition, the labor force population aged 16 to 59 was 865 million, accounting for 61.3% of the total population.
Keep up the good work, working people!
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