The Commerce Department is now releasing quarterly estimates of Gross Output along with GDP. This will contribute to a better understanding of the economy because it gives a more comprehensive view of economic decisions. GDP measures the value of a country’s “final” output in a given time period, which is the same as the income earned in producing that output. Gross Output (GO) measures the total value of all transactions that occur in the process of generating final output and income.
This is an important distinction, as economists have traditionally focused on “aggregate demand” for final goods and services, a convenience made possible by the traditional measurement of GDP. However, this construct understates the breadth and complexity of economic activity. There are myriad decisions made along the way to producing any product, which take time to play out, even in the “short-run” when some inputs are fixed. The GO measure will help to shed light on the economy’s dynamics, such as its responses to shocks and various policy changes. It may also contribute to a better understanding of the relationship between monetary aggregates and economic activity.