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# Is the GDP formula wrong?

 Posts: 3,500 Add as FriendChallenge to a DebateSend a Message 9/22/2011 7:01:35 PMPosted: 6 years agoThe GDP formula is comsumption + investment + government spending + (exports - imports).However, say you have two countries, Country A and Country B. Country A produces 2 units of Good A, and Country B produces 2 units of Good B. They are of equal value, let's say \$10. They then trade, one unit of Good A for one unit of Good B. So now each has a unit of Good A and a unit of Good B. You'd think that the GDP of each country would be \$20, as they produced \$20 worth of goods each. However, for both country, you have:\$10 + 0 + 0 + (\$10 - \$10) = \$10The equation says that GDP is \$10 for each country. This means that the net production of the two countries together is not equal to their GDP's added together. What do you think the formula should be?It is odd when one's capacity for compassion is measured not in what he is willing to do by his own time, effort, and property, but what he will force others to do with their own property instead.
 Posts: 19,305 Add as FriendChallenge to a DebateSend a Message 9/22/2011 7:09:46 PMPosted: 6 years agoYou said they produced two units each but only traded one of those units for one of the other. That means the other unit was either consumed locally or is inventory-- investment-- wherever you add it the sum should be 20 bucks.I don't think a formula worth a damn can be made, but this particular flaw doesn't seem real.It came to be at its height. It was commanded to command. It was a capital before its first stone was laid. It was a monument to the spirit of man.
 Posts: 3,500 Add as FriendChallenge to a DebateSend a Message 9/22/2011 7:14:00 PMPosted: 6 years agoAt 9/22/2011 7:09:46 PM, Ragnar_Rahl wrote:You said they produced two units each but only traded one of those units for one of the other. That means the other unit was either consumed locally or is inventory-- investment-- wherever you add it the sum should be 20 bucks.I don't think a formula worth a damn can be made, but this particular flaw doesn't seem real.My economics teacher said the traded-for unit didn't add to anywhere else. I'd think it would go under consumption.It is odd when one's capacity for compassion is measured not in what he is willing to do by his own time, effort, and property, but what he will force others to do with their own property instead.
 Posts: 11,204 Add as FriendChallenge to a DebateSend a Message 9/23/2011 9:09:28 AMPosted: 6 years agoAt 9/22/2011 7:14:00 PM, mongoose wrote:At 9/22/2011 7:09:46 PM, Ragnar_Rahl wrote:You said they produced two units each but only traded one of those units for one of the other. That means the other unit was either consumed locally or is inventory-- investment-- wherever you add it the sum should be 20 bucks.I don't think a formula worth a damn can be made, but this particular flaw doesn't seem real.My economics teacher said the traded-for unit didn't add to anywhere else. I'd think it would go under consumption.It's definitely under consumption then. The GDP formula is wrong for many other reasons though.Open borders debate: http://www.debate.org...
 Posts: 25,980 Add as FriendChallenge to a DebateSend a Message 9/23/2011 10:25:31 AMPosted: 6 years agoAt 9/23/2011 9:09:28 AM, darkkermit wrote:At 9/22/2011 7:14:00 PM, mongoose wrote:At 9/22/2011 7:09:46 PM, Ragnar_Rahl wrote:You said they produced two units each but only traded one of those units for one of the other. That means the other unit was either consumed locally or is inventory-- investment-- wherever you add it the sum should be 20 bucks.I don't think a formula worth a damn can be made, but this particular flaw doesn't seem real.My economics teacher said the traded-for unit didn't add to anywhere else. I'd think it would go under consumption.It's definitely under consumption then. The GDP formula is wrong for many other reasons though.It's not "wrong," it just isn't a good measuring stick."Wanting Red Rhino Pill to have gender"
 Posts: 11,204 Add as FriendChallenge to a DebateSend a Message 9/23/2011 10:46:41 AMPosted: 6 years agoAt 9/23/2011 10:25:31 AM, Ore_Ele wrote:At 9/23/2011 9:09:28 AM, darkkermit wrote:At 9/22/2011 7:14:00 PM, mongoose wrote:At 9/22/2011 7:09:46 PM, Ragnar_Rahl wrote:You said they produced two units each but only traded one of those units for one of the other. That means the other unit was either consumed locally or is inventory-- investment-- wherever you add it the sum should be 20 bucks.I don't think a formula worth a damn can be made, but this particular flaw doesn't seem real.My economics teacher said the traded-for unit didn't add to anywhere else. I'd think it would go under consumption.It's definitely under consumption then. The GDP formula is wrong for many other reasons though.It's not "wrong," it just isn't a good measuring stick.Well If I personally make myself dinner instead of ordering out, the latter is added onto to GDP while the former is not, even though the same amount of goods is produced.Open borders debate: http://www.debate.org...
 Posts: 25,980 Add as FriendChallenge to a DebateSend a Message 9/23/2011 11:09:56 AMPosted: 6 years agoAt 9/23/2011 10:46:41 AM, darkkermit wrote:At 9/23/2011 10:25:31 AM, Ore_Ele wrote:At 9/23/2011 9:09:28 AM, darkkermit wrote:At 9/22/2011 7:14:00 PM, mongoose wrote:At 9/22/2011 7:09:46 PM, Ragnar_Rahl wrote:You said they produced two units each but only traded one of those units for one of the other. That means the other unit was either consumed locally or is inventory-- investment-- wherever you add it the sum should be 20 bucks.I don't think a formula worth a damn can be made, but this particular flaw doesn't seem real.My economics teacher said the traded-for unit didn't add to anywhere else. I'd think it would go under consumption.It's definitely under consumption then. The GDP formula is wrong for many other reasons though.It's not "wrong," it just isn't a good measuring stick.Well If I personally make myself dinner instead of ordering out, the latter is added onto to GDP while the former is not, even though the same amount of goods is produced.But the value of those goods is not the same.Let's say you can make dinner for \$10 (cost of ingredients), or eat out the same dinner for \$40. If you choose to eat out, you are saying that you value the food at or above \$40, so it is a good deal (or, you're saying that you value your time and effort difference as more than \$30). If you make it yourself, you are saying that it is not worth \$40, but only \$10.Since the GDP measures everything in dollars, the first thing that needs to be done is to convert everything into dollar. But to do that, you need to know what it is worth. How do you know what something is worth? Well, the most accurate way is to see how much people will pay for it.So even though the two options are the same thing, because there is a difference in the amount you are willing to pay, there is a difference in it's actual value and there is a difference in how it affects the GDP."Wanting Red Rhino Pill to have gender"