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What's up, pseudo-communist kids,
this is another video
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of the channel EconomicaMENTE.
In election time, such as we
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are living now, it is
very common to have discussions
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about GDP all around but, after all,
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what is GDP? If you want
to know a little bit more
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about it, join us!
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GDP means "Gross Domestic Product".
We'll talk more later.
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about these acronyms that compose it.
It is, without a doubt, the most
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important statistical measure in
economics, since it represents
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the state of health of economy
itself. If you want to know if
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a person is feverish,
you measure their temperature.
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On the other hand, in Economics, if you want
to know the state, the health of the economy
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of a country, you will evaluate
and look at its GDP. Thus,
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the Gross Domestic Product is the
measure of health and size
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of a measured economy, that is,
measured over a given period.
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Economists often make
this assessment
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for one quarter, three months, or
for one year. Let's look
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for the formal definition of Gross
Domestic Product, the famous GDP.
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It means the following:
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is the total market value of
goods and final products produced
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within an economy, that is, of
a country during a given
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period of time. In short: is it a
lot for you to understand?
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Let's look at the composition of
this word: first letter: product.
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What does product mean? Product
are all goods and services.
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Picture it: video-games,
computers, laptops, anyway...
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What you're using now
to watch me is a product.
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And what I'm doing here
right now is a service.
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So when I'm looking
at product, I'm
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talking about what we consume,
or even about
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what we extract from the
land, via agriculture, for example.
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We talk about product, now let's talk
about domestic. The name itself already says,
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Keiciane just said:
"domestic means
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it was produced here."
Isn't it?
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It was produced here,
that is, within the geographical limits
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of Brazil, regardless of whether
the capital is Brazilian
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or foreign, so the
central difference to Gross
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Domestic Product to Gross National
Product, GNP, that we will
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discuss later, is bound to
this point. And the last
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aspect that we are going to talk about is
Gross. Why am I talking about Gross?
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Because I want to understand the
total market value, that is, the market
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price of the product or
service that I have consumed.
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What do I mean by that?
Imagine a service that I
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consumed. I cut this beautiful hair here,
I paid a value, I paid
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a value, this I am saying
is the gross amount that was
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paid at market price
for that service.
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Just to finish the reasoning and
have an extremely important point
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that some people confuse, which is precisely
with the middle item, with Domestic.
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When we look at GDP,
I'm looking at the following:
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I want to know the full value
of the production that was produced
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here, regardless of whether that
production is of a
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multinational company.
Unlike GNP, Gross
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National Product, where you look at
nationality. The difference in GNP
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is that it looks only at the
origin of capital, whether it was produced
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by people or companies
of Brazilian nationality,
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whether these companies are here or
not. And how is GDP calculated?
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There are several ways to
calculate GDP. The modern way
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and more used and employed
by statistical economists
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the point of view of expenditure.
This equation
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that is appearing here for you,
this little soup of letters that is
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C + I + G + (X-M).
What does these letters
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mean? Let's go: GDP.
When I look at gross
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domestic product, it's the sum of these
variables. The first variable is "consumption",
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then GDP is a share
that represents private
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consumption of families,
how much I am buying and
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services, in computer, in
iPad, in food, anyway, it's
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the private consumption of households.
When I look at another
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letter, to the letter I, it
is linked to investment, that is,
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all that is being
acquired in fixed assets,
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machinery, equipment and
infrastructure. Therefore,
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investment is a central
pillar of GDP.
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The third case concerns G. G,
I am referring to government
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expenses, at both the State,
Municipal, and Federal levels.
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They're government expenses, whether
with schools, on construction
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of roads, anyway, all the resources
spent with the government
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in the hiring or purchase of goods
and services. And the last case
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is this expression that is enclosed
in parentheses: X - M.
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X is the total value
of our exports. The products
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that are produced internally are
sent to other countries.
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"-M". M concerns
imports, all that
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which is produced in other countries
and which we are importing,
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bringing and consuming internally.
But, look how interesting:
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I'm doing X - M. This
expression, you probably know
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as "net exports" or, more than that, as
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the balance of trade. This is
the balance of
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trade, exports minus imports.
That is why you'll always
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hear about the role and
importance of agribusiness
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in the Brazilian economy, because it
contributes strongly with the X,
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raising and participating to maintain
the balance of trade
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X - M, surplus,
that is, in a positive way.
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So, you understood from this
expression how GDP
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is calculated. GDP is a reflection,
then, of private consumption
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of families, of investments, of government
expenditures, and of the balance
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of the trade balance. This guy,
X - M, which is the balance
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of the trade balance, we will talk
about it later, on other
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video, that is to comment on
the degree of commercial openness
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of Brazil. Let's talk about it.
Following our discussion,
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why is GDP so important?
First: the rhythm
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of economic growth affects
business, affects the generation
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of employment and, consequently,
investment. More than that,
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understanding the economy
helps economy policymakers
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make decisions. And, furthermore, understanding that GDP is
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a way of comparing the
performance of our economy
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with the other economies.
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The Brazilian GDP in 2017
was approximately 6 trillion reais.
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Wow, and Apple hit a trillion dollars,
didn't it? Wow, Brazil is worth two Apple.
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What the hell, huh? I think
that's it, a trillion dollars.
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We're in liquidation, people.
So let's go!
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The Brazilian GDP in 2017
was approximately 6 trillion reais.
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However, it is common for us to
assess GDP in percentage terms. Usually,
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we say GDP growth in
2017 was 1%. An important
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point we need to evaluate
is this: when I say that
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the GDP grew 1%, remember that
I am talking at market prices,
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and an important sector when
we talk about price is
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linked to inflation. This is an
aspect that we are going to
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comment here on EconomicaMENTE,
but when I look at GDP,
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I need to look at real GDP,
what does real GDP mean?
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I'm saying that the economy
grew 1% in real terms,
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that is, by eliminating the effects
of inflation. However, GDP isn't
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the best measure of economic
performance. However, what isn't
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being computed in GDP?
An example are services that
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parents offer to their
children or, more than that,
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activities that are illegal, whether
they are drug related
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or even prostitution.
Look at this chart. It's very
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common for economists to give names
to the behavior of GDP.
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Imagine I'm seeing a growth
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of GDP consecutively in 3 months.
I am saying that the
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economy is expanding.
On the other hand,
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if we observe the
exact opposite, GDP comes
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reducing consecutively over
three months,
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that gives me an idea of recession.
Let's look at Brazil's case.
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This chart shows the evolution
of the Brazilian GDP.
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Note that in 2017, as I mentioned,
we grew 1%. On the other hand,
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in 2015 and 2016 we shrank,
we had a recession of 3.5%,
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the largest recession in
Brazil's recent history.
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An extremely important point is
that we can not
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compare the gross value of GDP from
one country to another. Why? I have
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different economic dimensions
and that are
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impacted by several variables.
In this case, usually, we use
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the GDP per capita. What does
per capita GDP mean, just like this
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formula that is appearing for
you? It's exactly the current GDP,
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the GDP of a given
year divided by the
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population residing in a country in
the middle of the year.
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GDP per capita is the
best measure to compare performance
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between different countries. In addition, GDP
per capita is a good
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measure to understand the standard of
living of the people of that country.
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Is it the best indicator? Of course not,
there are flaws and we are going
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talk about them in other
videos. However, if we
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compare that the Brazilian economy grew
1% in 2017, the GDP
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per capita grew only 0.2% in
that same year. This means that,
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in nominal terms, I am
saying that the population had
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an income, a per capita GDP
of approximately 31 thousand reais.
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The best way to
compare performance across
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different economies, different countries,
is precisely
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through real GDP per capita.
Why real GDP per capita?
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First: because it eliminates the
effect of inflation, the effect
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caused by the exchange rate and
even the effect caused
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by the size of the
population of each country.
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GDP is of critical economic importance.
Governments
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rely heavily on this indicator
for the formulation
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of public policies and even
to determine the volume
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of investments. In Brazil, for
example, education receives
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a percentage of our own GDP.
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Despite all this, the way we
measure GDP is, in fact,
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a Herculean job and
very difficult to do.
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- HERCULEAN.
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Just remember "Hercules",
"The Labors of Hercules".
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Herculean: that demands an excessive
effort, that is very hard
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or difficult to carry out;
worthy of Hercules.
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Given that it is a rather difficult
job and, as I said, Herculean
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to be done, it is very common
to have revisions of GDP figures.
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This concerns the volume of
new information that is
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available, new information that will
give more reliability to
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this indicator and, eventually, will
give new appearances to this
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indicator so that we have
revisions, so it is very
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common, eventually,
you find IBGE itself,
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responsible for the calculation
of the Brazilian GDP, presenting
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revisions of national accounts.
To wrap up, guys, the GDP isn't
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a perfect measure, it is a measure
of production, it is not a measure
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of well-being. More than
that, if environmentalists
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who are listening and watching us
in this video will say:
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look, but the GDP does not
capture the negative externalities, anyway,
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all this is criticism that
we will discuss
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later. However, for now, it
is the best indicator we have.
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This is a video from the channel
EconomicaMENTE.
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What is most interesting and that I
want you to look at in this
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video is mainly about
the calculation of GDP.
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Remember that formula that was
there and look at this
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formula, especially when you're
listening to public policies.
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How do public
policies affect each
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one of those variables? Consumption,
investment, government spending,
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and exports. When you understand
this, you understand how
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the GDP is formed and how you
leverage the growth of an economy.
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Well, that's right, our dear
Juliana is telling me here
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that you should subscribe to this
channel, so, if you like it,
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if you're enjoying the
content that we are presenting you,
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subscribe to this channel and
follow us on our social networks, thanks!
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Translation: Skylar
Review: Luan Ramalho