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I'm not sure I understand. What process is changing? The "accounting trick" doesn't stop working. Let's try a very simple example of buying all our inventory i
by Aloisius 1y ago
I'm not sure I understand. What process is changing? The "accounting trick" doesn't stop working.
Let's try a very simple example of buying all our inventory in one quarter and selling it in another - what is supposedly behind our GDP woes.
Let's say in Q1, the only spending was on $1 trillion of imports into private inventories, thus: I=$1 trillion, C=$0, G=$0, X=$0, M=$1 trillion. That gives us a GDP of $0.
Next quarter, flush with product there's no need to import anymore and the entire inventory is somehow sold domestically, thus: I=-$1 trillion, C=$1 trillion, G=$0, X=$0, M=$0. That gives us again, a GDP of $0.
Yet articles claim that the GDP in Q2 would be higher due to the drop in imports and was reduced in Q1 due to an increase in imports.
- lesuorac 1y agoDon't you always measure GDP using spending (for convince / accuracy of price) so if you import $1 trillion and don't sell it then the GDP is $-1 trillion? So Q1 is $-1 trillion and Q2 is $1 trillion? IIRC, Investment is more of I bought machinery to make socks not I have 100 nintendo switches.
- Aloisius 1y agoI (investment) in the GDP includes changes in private inventory, not just spending on fixed assets, so the 100 nintendo switches should be in there. That's why in my example Q2 investment goes negative since inventories get depleted when they are sold.