[Script Info]
Title: 
[Events]
Format: Layer, Start, End, Style, Name, MarginL, MarginR, MarginV, Effect, Text
Dialogue: 0,0:00:00.00,0:00:03.20,Default,,0000,0000,0000,,♪ [music] ♪
Dialogue: 0,0:00:12.00,0:00:14.86,Default,,0000,0000,0000,,- [Instructor] What is\Ngross domestic product,
Dialogue: 0,0:00:14.86,0:00:17.10,Default,,0000,0000,0000,,otherwise known as GDP?
Dialogue: 0,0:00:17.10,0:00:22.70,Default,,0000,0000,0000,,Gross domestic product is the market value\Nof all finished goods and services
Dialogue: 0,0:00:22.70,0:00:25.39,Default,,0000,0000,0000,,produced within a country in a year.
Dialogue: 0,0:00:29.66,0:00:32.06,Default,,0000,0000,0000,,Think about the economy\Nlike a giant supermarket
Dialogue: 0,0:00:32.06,0:00:35.36,Default,,0000,0000,0000,,filled with millions of goods\Nlike dresses, and washing machines,
Dialogue: 0,0:00:35.36,0:00:38.21,Default,,0000,0000,0000,,and services\Nlike dog walking and massages.
Dialogue: 0,0:00:39.29,0:00:43.52,Default,,0000,0000,0000,,Every time a finished good\Nor service is sold, we ring up the price.
Dialogue: 0,0:00:45.25,0:00:49.48,Default,,0000,0000,0000,,At the end of the year,\Nwe ring up the total - that's the GDP.
Dialogue: 0,0:00:49.48,0:00:51.81,Default,,0000,0000,0000,,Let's look more closely\Nat some of the details.
Dialogue: 0,0:00:51.81,0:00:53.93,Default,,0000,0000,0000,,Notice that we said GDP\Nis the market value
Dialogue: 0,0:00:53.93,0:00:56.38,Default,,0000,0000,0000,,of all finished goods and services.
Dialogue: 0,0:00:56.38,0:00:58.04,Default,,0000,0000,0000,,A finished good or service is one
Dialogue: 0,0:00:58.04,0:01:00.82,Default,,0000,0000,0000,,that will not be sold again\Nas part of some other good.
Dialogue: 0,0:01:00.82,0:01:03.71,Default,,0000,0000,0000,,When a bakery buys\Nflour, eggs, and butter,
Dialogue: 0,0:01:03.71,0:01:07.55,Default,,0000,0000,0000,,we don't count these sales in GDP\Nbecause these goods aren't finished.
Dialogue: 0,0:01:07.55,0:01:11.48,Default,,0000,0000,0000,,They are intermediate goods that,\Nwhen combined, will become
Dialogue: 0,0:01:11.48,0:01:13.73,Default,,0000,0000,0000,,a finished good - a cake, for example.
Dialogue: 0,0:01:13.73,0:01:16.53,Default,,0000,0000,0000,,But, if a consumer buys an egg\Nto make an omelet,
Dialogue: 0,0:01:16.53,0:01:18.05,Default,,0000,0000,0000,,the egg is a finished good
Dialogue: 0,0:01:18.05,0:01:20.56,Default,,0000,0000,0000,,because it won't be sold again\Nas part of some other good.
Dialogue: 0,0:01:20.56,0:01:24.07,Default,,0000,0000,0000,,In other words, our GDP supermarket\Nis like a real supermarket.
Dialogue: 0,0:01:24.07,0:01:27.29,Default,,0000,0000,0000,,At the GDP register, we ring up\Nthe eggs sold to consumers,
Dialogue: 0,0:01:27.29,0:01:31.39,Default,,0000,0000,0000,,and the cakes, but we don't ring up\Nthe eggs the baker used to make the cake.
Dialogue: 0,0:01:33.40,0:01:36.04,Default,,0000,0000,0000,,There are also goods\Nthat are used to make other goods,
Dialogue: 0,0:01:36.04,0:01:40.61,Default,,0000,0000,0000,,but are still considered finished goods.\NThese are called capital goods.
Dialogue: 0,0:01:40.61,0:01:43.88,Default,,0000,0000,0000,,If Caterpillar produces a tractor\Nand sells it to a farm,
Dialogue: 0,0:01:43.88,0:01:46.63,Default,,0000,0000,0000,,the tractor is considered a finished good.
Dialogue: 0,0:01:46.63,0:01:50.90,Default,,0000,0000,0000,,The tractor is finished\Nand its value is added to the GDP.
Dialogue: 0,0:01:50.90,0:01:53.84,Default,,0000,0000,0000,,Although the tractor is used\Nto make other goods,
Dialogue: 0,0:01:53.84,0:01:56.82,Default,,0000,0000,0000,,it won't be sold again\Nas part of another good,
Dialogue: 0,0:01:56.82,0:01:59.92,Default,,0000,0000,0000,,so the tractor is still a finished good.
Dialogue: 0,0:01:59.92,0:02:03.31,Default,,0000,0000,0000,,♪ [music] ♪
Dialogue: 0,0:02:03.31,0:02:06.24,Default,,0000,0000,0000,,The GDP is the market value\Nof all finished goods and services
Dialogue: 0,0:02:06.24,0:02:09.67,Default,,0000,0000,0000,,produced within a country in a year.
Dialogue: 0,0:02:09.67,0:02:12.08,Default,,0000,0000,0000,,GDP only counts production.
Dialogue: 0,0:02:12.08,0:02:15.61,Default,,0000,0000,0000,,If an old house is sold this year,\Nthat doesn't add to GDP
Dialogue: 0,0:02:15.61,0:02:21.18,Default,,0000,0000,0000,,since the house wasn't produced this year.\NOnly the sale of new houses add to GDP.
Dialogue: 0,0:02:22.40,0:02:24.40,Default,,0000,0000,0000,,♪ [music] ♪
Dialogue: 0,0:02:27.05,0:02:31.66,Default,,0000,0000,0000,,GDP also only counts goods and services\Nproduced within a country.
Dialogue: 0,0:02:31.66,0:02:34.86,Default,,0000,0000,0000,,If you buy a bottle of wine\Nimported from France,
Dialogue: 0,0:02:34.86,0:02:38.56,Default,,0000,0000,0000,,that adds to France's GDP, not to U.S. GDP.
Dialogue: 0,0:02:38.56,0:02:41.11,Default,,0000,0000,0000,,On the other hand, a computer\Nproduced in the United States
Dialogue: 0,0:02:41.11,0:02:44.95,Default,,0000,0000,0000,,and exported to France\Nadds to the U.S. GDP.
Dialogue: 0,0:02:45.48,0:02:47.48,Default,,0000,0000,0000,,♪ [music] ♪
Dialogue: 0,0:02:50.70,0:02:52.97,Default,,0000,0000,0000,,Let's go back to the definition \None more time,
Dialogue: 0,0:02:52.97,0:02:56.31,Default,,0000,0000,0000,,to see some of the limits of GDP\Nas a measure of economic production.
Dialogue: 0,0:02:56.31,0:02:59.38,Default,,0000,0000,0000,,GDP is the market value\Nof all finished goods and services
Dialogue: 0,0:02:59.38,0:03:02.15,Default,,0000,0000,0000,,produced within a country in a year.
Dialogue: 0,0:03:02.15,0:03:04.70,Default,,0000,0000,0000,,If a good isn't bought\Nand sold in a market,
Dialogue: 0,0:03:04.70,0:03:07.38,Default,,0000,0000,0000,,then it's not typically counted in GDP.
Dialogue: 0,0:03:07.38,0:03:09.72,Default,,0000,0000,0000,,Why not? Counting the market value
Dialogue: 0,0:03:09.72,0:03:12.77,Default,,0000,0000,0000,,of, say, all the breakfast cereal\Nproduced in the U.S. is easy,
Dialogue: 0,0:03:12.77,0:03:14.38,Default,,0000,0000,0000,,at least in principle.
Dialogue: 0,0:03:14.38,0:03:17.84,Default,,0000,0000,0000,,Just add up the price every time\Na box of cereal is sold.
Dialogue: 0,0:03:17.84,0:03:21.94,Default,,0000,0000,0000,,Since market prices are observable,\Nevery statistician who counts carefully
Dialogue: 0,0:03:21.94,0:03:24.39,Default,,0000,0000,0000,,will come up with pretty much\Nthe same number.
Dialogue: 0,0:03:24.39,0:03:28.10,Default,,0000,0000,0000,,But, without market prices,\Nthere's no easy or agreed upon way
Dialogue: 0,0:03:28.10,0:03:30.32,Default,,0000,0000,0000,,to calculate how much a good is worth.
Dialogue: 0,0:03:30.32,0:03:33.98,Default,,0000,0000,0000,,Polar bears, for example,\Naren't counted in GDP.
Dialogue: 0,0:03:33.98,0:03:36.24,Default,,0000,0000,0000,,The statisticians and economists\Nwho calculate GDP
Dialogue: 0,0:03:36.24,0:03:38.20,Default,,0000,0000,0000,,have nothing against polar bears.
Dialogue: 0,0:03:38.20,0:03:43.21,Default,,0000,0000,0000,,The problem is that there's no easy way\Nto calculate how valuable polar bears are.
Dialogue: 0,0:03:43.99,0:03:46.49,Default,,0000,0000,0000,,Just because GDP\Ndoesn't include polar bears
Dialogue: 0,0:03:46.49,0:03:48.75,Default,,0000,0000,0000,,doesn't mean that we\Ncan't love polar bears.
Dialogue: 0,0:03:48.75,0:03:51.25,Default,,0000,0000,0000,,And if polar bears\Nwere included in GDP,
Dialogue: 0,0:03:51.25,0:03:54.21,Default,,0000,0000,0000,,that wouldn't require us\Nto love polar bears either.
Dialogue: 0,0:03:54.21,0:03:57.79,Default,,0000,0000,0000,,Ultimately, GDP is just a number.\NBut it's a useful number.
Dialogue: 0,0:03:57.79,0:04:01.25,Default,,0000,0000,0000,,In the next few videos, we'll show how\Nthe GDP number can be used
Dialogue: 0,0:04:01.25,0:04:03.00,Default,,0000,0000,0000,,as a measure of the standard of living.
Dialogue: 0,0:04:03.00,0:04:06.81,Default,,0000,0000,0000,,But for that, we'll have to make\Na distinction between the Nominal GDP,
Dialogue: 0,0:04:06.81,0:04:11.08,Default,,0000,0000,0000,,what we have just discussed so far,\Nand Real GDP. So stay tuned.
Dialogue: 0,0:04:12.67,0:04:16.14,Default,,0000,0000,0000,,- [Narrator] If you want to test yourself,\Nclick "Practice Questions."
Dialogue: 0,0:04:16.14,0:04:20.34,Default,,0000,0000,0000,,Or, if you're ready to move on,\Nyou can click "Go to the Next Video."
Dialogue: 0,0:04:23.38,0:04:25.86,Default,,0000,0000,0000,,You can also visit MRUniversity.com
Dialogue: 0,0:04:25.86,0:04:28.86,Default,,0000,0000,0000,,to see our entire library\Nof videos and resources.
Dialogue: 0,0:04:28.86,0:04:30.86,Default,,0000,0000,0000,,♪ [music] ♪