Gross Output III

So, to contest the notion the the “economy is two-thirds consumption,” all of the Business-to-Business (B2B) transactions must be separated from both Gross Output and Gross Domestic Product (GDP).  For Gross Output, B2B transactions consists of all Intermediate Inputs that I’ve discussed previously.

However, GDP contains one element of B2B and that is for the final sale of a good or service and it is known technically as “gross fixed investment”–a final sale would be to the end-user such as a 747 being purchased by American Airlines.  So total “B2B expenditures” are the sum of Intermediate Inputs and Gross Fixed Investment.

At the end of the day, the chart below shows the results of this redefinition.  B2B expenditures make up 53.5 percent of all economic activity as defined by Gross Output.  Personal consumption, on the other hand, falls to 38 percent and “all other” accounts for the remaining 8.4 percent (government expenditures and international trade).

Breakdown of Gross Ouput by Major Component for 2008