Aggregate production

economic-dictionary

Aggregate production is an economic macro-magnitude that reveals the quantity of final goods and services produced in an economy during a given period of time, which is generally one year.

Such aggregate production is a flow of goods and services in the final stage. Therefore, it should not be thought that this variable reflects the stock of goods in an economy. Let us remember that the final product is that good that is already ready to be consumed by its applicants.

Thus, aggregate production does not include the intermediate goods that have been produced in the period, that is, the production of intermediate goods is not added to aggregate production. Let us bear in mind that intermediate goods are those goods that are used in the manufacture of other products for final consumption.

What does aggregate production reflect?

We know that national accounting itself measures economic activity in an aggregate way. In this system of accounts, which is the national accounting, the gross domestic product (GDP) becomes the indicator of what is the aggregate production.

This GDP is not really an excellent measure of economic growth. Since in its measure (in nominal terms) the inflation processes registered in the economy are not taken into account. However, a variable that is going to constitute a good measure of the economic growth of a country is the real GDP. With this measure we avoid the effect of inflation, since it then measures the production of final goods and services applying the base year method.

Thus, this economic macro-magnitude, by itself, does not reveal the state of a given economy, much less the level of well-being achieved by it. She, plain and simple, is nothing more than an indicator of the production carried out in a country. Therefore, aggregate production is related to the economic growth of the country and not intimately to economic development.

Read gross domestic product (GDP) Production function

Tags:  Colombia Business cryptocurrencies 

Interesting Articles

add