Gross output

In economics, gross output (GO) is the measure of total economic activity in the production of new goods and services in an accounting period. It is a much broader measure of the economy than gross domestic product (GDP), which is limited mainly to final output (finished goods and services). In 2016, the Bureau of Economic Analysis estimated gross output in the United States to be $32.1 trillion, compared to $18.6 trillion for GDP. In economics, gross output (GO) is the measure of total economic activity in the production of new goods and services in an accounting period. It is a much broader measure of the economy than gross domestic product (GDP), which is limited mainly to final output (finished goods and services). In 2016, the Bureau of Economic Analysis estimated gross output in the United States to be $32.1 trillion, compared to $18.6 trillion for GDP. GO is defined by the Bureau of Economic Analysis (BEA) as 'a measure of an industry's sales or receipts, which can include sales to final users in the economy (GDP) or sales to other industries (intermediate inputs). Gross output can also be measured as the sum of an industry's value added and intermediate inputs.' It is equal to the value of net output or GDP (also known as gross value added) plus intermediate consumption. Gross output represents, roughly speaking, the total value of sales by producing enterprises (their turnover) in an accounting period (e.g. a quarter or a year), before subtracting the value of intermediate goods used up in production. Starting in April 2014, the BEA began publishing gross output and gross output-by-industry on a quarterly basis, along with GDP. Economists regard GO and GDP as complementary aggregate measures of the economy. Many analysts view GO as a more comprehensive way to analyze the economy and the business cycle. 'Gross output is the natural measure of the production sector, while net output is appropriate as a measure of welfare. Both are required in a complete system of accounts.' In his work, The Purchasing Power of Money: Its Determination and Relation to Credit, Interest, and Crises (1911, 1920), Yale professor Irving Fisher introduced a theoretical measure of 'volume of trade' with his equation of exchange: MV = PT, where PT measured the 'volume of trade' in the economy at a specified time. In 1931, Friedrich A. Hayek, the Austrian economist at the London School of Economics, created a diagram known as Hayek's triangles as a theoretical measure of the stages of production. Hayek's triangles formed the basis of gross output, before GNP or GDP were invented. However, Hayek's work was strictly theoretical, and no attempt was developed to statistically measure gross output. Simon Kuznets, a Russian American economist at the University of Pennsylvania, did breakthrough work in the 1930s in measuring national income, 'the size of the final net product.' He defined net product as follows: 'If all the commodities produced and all the direct services rendered during the year are added to their market value, and from the resulting total we subtract the value of that part of the nation's stock of goods that was expended (both as raw materials and as capital equipment) in producing this total, then the remainder constitutes the net product of the national economy of the year.' Thus, net product focused on final output only, and excluded business-to-business (B2B) transactions in the supply chain. He expanded his 'net output' data to measure Gross National Product (GNP) starting in 1942.