5 ms·
They're not the same. Velocity of money affects GDP. e.g. you spend a dollar, how quickly does that other person spend that same dollar. Business to business
by adam_arthur 4y ago
They're not the same.
Velocity of money affects GDP. e.g. you spend a dollar, how quickly does that other person spend that same dollar.
Business to business spending is in GDP. Leveraged buying such as real estate is in GDP. Government spending is in GDP. Trade imbalances affect GDP.
People can save rather than spend their income, etc. Pretty clear
- missedthecue 4y agoBut the velocity of money doesn't change that. $1 spent is $1 of income no matter how or where it's spent. Every transaction necessarily has a buyer and a seller
- adam_arthur 4y agoIncome has nothing to do with GDP. Maybe do some research before littering the comments with uneducated takes. And real income/GDP is what matters more in the end anyway. E.g. nominal wage increases aren't beneficial to people if their spending power is in decline
- missedthecue 4y agoAre you confusing the economic term "income" with wages?
- adam_arthur 4y agoWe're taking about the colloquial definition of income as per the author's mistake with wages. And yes even income of producers is not GDP, because you have to factor in imports/exports
- tremon 4y agoThe same dollar changing hands every day for a week contributes $7 to the national GDP. A dollar changing hands only once contributes $1 to the national GDP.
- reactspa 4y agoI too am interested in the difference between GDP and Income, and my usual sources (e.g. Wikipedia) don't satisfy. 1) Regarding velocity: if the other person quickly spends that same dollar, unless they spend it abroad, wouldn't it end up as someone else's income, domestically? So why should velocity matter? 2) Request you to elaborate your explanation using the example of a real country whose per capita GDP and per capita Income differ substantially.
- adam_arthur 4y agoIf people in the US buy things from China, the income they earn does not contribute to US GDP. One example. These are basic concepts with clear definitions. Why so many argumentative comments trying to dispute a textbook definition? Look it up first and stop spreading false information
- jltsiren 4y ago> If people in the US buy things from China, the income they earn does not contribute to US GDP. The income has already contributed to US GDP, by definition. The person has already produced goods or services and someone else has spent money on them, which becomes the income of the person in question. If the US person then buys Chinese goods, their expenditure does not contribute to US GDP.
- adam_arthur 4y agoYes, thank you for proving my point. How people elect to spend their income affects GDP, thus income does not equal GDP. Have you figured it out yet?
- jltsiren 4y agoYou are looking at this the wrong way, from an individual perspective. National economy is about production, not consumption. Income is something that has already been earned, not something you choose to spend. Production comes first, and then expenditure gives it value and turns it into income. The way GDP is defined, the sum of domestic production in a time period is always the same as the sum of domestic expenditure and the sum of domestic income. If someone buys Chinese goods, they contribute to Chinese production, expenditure, and income.
- gruez 4y ago>Leveraged buying such as real estate is in GDP Not really. Building new houses contributes to GDP, as does renovating it, but if you're buying an existing house the only part that contributes to GDP is the realtor/lawyer fees. https://www.nahb.org/news-and-economics/housing-economics/housings-economic-impact/housings-contribution-to-gross-domestic-product https://www.nahb.org/news-and-economics/housing-economics/ho...
- adam_arthur 4y agoHow do you think new construction is financed? What do you think has been the biggest contributor to Chinese GDP growth? Yet you say "not really", which is obviously wrong. Leverage impacts GDP, yes, and in a big way.