GDP-Gross Domestic Product week one macroeconomics
How resale of items impacts GDP
The textbook defines Gross domestic product (GDP) as “The market value of all final goods and services produced within a country during a specific period” (Gwartney pg. 131). GDP is a tool to measure a country’s economic growth. The term re-sale is defined as “The act of selling something that you have bought” (Merriam-Webster). The resale of items are not included in the GDP because they do not involve current production, they were already counted in the GDP during the time period of its originating purchase. Our textbook further explains that resale’s “Merely changes the ownership of the goods or assets” (Gwartney, pg 133). However, the cost or sales commissions made on the second hand sale are included in the current GDP.
When the GDP represents an unhealthy economy, unemployment numbers increase, lower business profits and the cost of purchasing new increases. People spend less and when they do make purchases the cost of new is not the optimal decision. Buying second hand has benefits of a lower cost for the purchaser and allows the seller to make money back on its original investment. This change of ownership has very little impact on the GDP and economic growth. If there is a cost involved in making the change of ownership or a commission to be made on the sale, the cost and commissions add to the country’s GDP. The actual cost of the item does not add to the GDP.
GDP is an indicator a tool to determine the direction of economic growth. With this being said, it isn’t perfect; one incident can send our economy souring such as the horrific events of September 11, 2001. No GDP percentage could have prepared for this day and the effects on our country’s economy. I believe there must be a balance, buying all new may assist in our economic growth but if it’s not financially wise to do so people end up in large amounts of debt which in turn can affect the economy negatively later. Yes higher resale economy may not contribute the
The textbook defines Gross domestic product (GDP) as “The market value of all final goods and services produced within a country during a specific period” (Gwartney pg. 131). GDP is a tool to measure a country’s economic growth. The term re-sale is defined as “The act of selling something that you have bought” (Merriam-Webster). The resale of items are not included in the GDP because they do not involve current production, they were already counted in the GDP during the time period of its originating purchase. Our textbook further explains that resale’s “Merely changes the ownership of the goods or assets” (Gwartney, pg 133). However, the cost or sales commissions made on the second hand sale are included in the current GDP.
When the GDP represents an unhealthy economy, unemployment numbers increase, lower business profits and the cost of purchasing new increases. People spend less and when they do make purchases the cost of new is not the optimal decision. Buying second hand has benefits of a lower cost for the purchaser and allows the seller to make money back on its original investment. This change of ownership has very little impact on the GDP and economic growth. If there is a cost involved in making the change of ownership or a commission to be made on the sale, the cost and commissions add to the country’s GDP. The actual cost of the item does not add to the GDP.
GDP is an indicator a tool to determine the direction of economic growth. With this being said, it isn’t perfect; one incident can send our economy souring such as the horrific events of September 11, 2001. No GDP percentage could have prepared for this day and the effects on our country’s economy. I believe there must be a balance, buying all new may assist in our economic growth but if it’s not financially wise to do so people end up in large amounts of debt which in turn can affect the economy negatively later. Yes higher resale economy may not contribute the