What Economic Activities Are Not Included in GDP? The debate over what economic activities are not included in GDP is re-igniting all over the world. This debate is basically between those who think that growth should be the main goal of any nation state, and those who believe that it should be taken into consideration only to some extent. In many ways, the two arguments could be compared to a marriage dispute.
When we talk about what economic activities are not included in GDP, we usually refer to what an individual or group does on their own, outside the bounds of the nation state. This could also include private or even public consumption as well. The meaning of the term “economic activity” is the total value of all activities contributed by a person or group to the production of goods and services. There are five economic activities that are usually taken into account under this definition. They are production, savings, investment, distribution of wealth.
It was also suggested that the term “what economic activities are not included in GDP” could be used in a much broader sense that actually encompasses the economic activities performed by individuals as well as groups. For example, a certain group may include the producers of machinery or vehicles and the owners of business establishments. Both of these types of economic activities are not included in GDP. However, the former is something that a country's central account could include indirectly as well, through indirect taxes on goods and services, for instance.
As for the term “what economic activities are not included in GDP,” it usually refers to the government budget. This is because the government accounts for the bulk of the country's wealth. Therefore, it would make much more sense to include this in the GDP rather than the other way around. But even if it were to be included, the other forms of economic activity still have their place.
Private economic activity refers to the activities of businesses and corporations conducting transactions for their own account. A company that produces widgets could be viewed as a business. A farmer who grows crops could also be considered a business owner. The activities of capital formation within an economy can sometimes be seen as business activities as well. For instance, when a business chooses to expand its operations by buying another manufacturing unit, it is capital formation, albeit a vertical one. So, although it may not be capital formation, it is a form of economic activity.
As for non-economic activities, they include international trade and monetary system activities. Monetary system means money and the payment systems associated with it, while international trade simply refers to the buying and selling of goods and currencies. So, both these forms of economic activity may be seen as economic activities depending on the country where they take place. For example, the purchase of goods and currencies by American companies and the sale of Chinese products would be seen as an American investment, while the purchase of Japanese currency and the sale of British pounds would be viewed as an event related to monetary system.
On the other hand, capital formation refers to the growth of assets and value. It is capital that has been added through different processes and can be either direct or indirect. So, it is something that creates value for a society through the creation of new goods and services, and is the very basis of the operation of the market economy. This market is the very ground where . . . . . . what economic activities are not included in GDP can be seen.
To conclude, it can be said that the concept of what economic activities are not included in GDP is very complex. It is up to each nation and its central bank to decide what economic activities are not included in its national economic data. In addition, there are various inter-national agencies such as the World Bank and International Monetary Fund which define what these economic activities are, and any of these agencies could also provide information on what these are when it comes to their own data.