This seems like a complicated question at first glance. To understand it, we must break it down into its two main terms: stocks and GDP (gross domestic product). From there, we can see how they interact with one another, and answer the question: Are stocks included in GDP?
What are stocks?
Stocks are something we hear constantly in the daily lexicon. It’s nearly impossible to turn channels on the TV, or surf the web, without seeing something related to stocks.
Because of this, we rarely take a step back to understand what stocks are and how they have value.
In essence, stocks are units of ownership in a company. Other common terms are shares of equity or shares of stock.
Fiscally speaking, if you buy a stock in the imaginary company Matt’s Widgets, you are buying a piece of actual (albeit partial) ownership in that company.
Ready to build your portfolio? With Public.com you can follow other investors, discover companies that are inline with your beliefs, and invest into stocks and crypto with very little money! What are you waiting for? Check out Public Now!
Why do companies sell stocks?
One of the main concerns companies face is raising capital. Whether they are just starting out or already established and looking to expand their operations, they all need one thing: cold hard cash.
Due to the nature of capitalism and the competitive marketplace, companies usually funnel operating profits back into the company to build assets and scale operations. Large scale expansions and projects, therefore, require large influxes of cash.
As opposed to taking high-interest loans, companies will sell shares of stock.
It doesn’t matter if you have $500 or $5 million.
Here’s what I recommend you do with your money right now.
ATTENTION: The following video is a serious financial warning from one of America’s richest men. He believes this event will make the rich even richer while financially affecting countless others and fan the flames of social protest.
It’s free to watch and by doing so I believe you’ll be ahead of everyone else struggling to understand what is really going on. I hope you take advantage of this opportunity!
Not only do shareowners receive partial ownership in the company, but they will receive certain privileges as well, things like voting rights, shares of a companies profit (called dividends in financial jargon), and capital appreciation (basically when a stock’s value goes up so does the value of your shares).
Now that we’ve got an idea of what stocks are and how they have value, let’s talk about GDP.
What is GDP?
GDP stands for Gross Domestic Product. As a number, it represents the total monetary or market value of all finished goods and services produced in a country, for a specific time frame.
In essence, it symbolizes the economic health of a nation. To put it even more simply, GDP measures the “output” of all goods and services in an economy.Stock Advice That Beats The Market! Stock Advisor's recommendations have beaten the market over the past 19 years. Tired of picking losers? Stock Dork readers can join for only $99 a year! Check out Stock Advisor today!
What does GDP include?
GDP includes all private and public companies’ consumption, as well as government outlays (payments for contracts, appropriations, etc.), investments, additions to private inventories, paid-in construction costs, and the foreign balance of trade (net of exports minus imports).
Are Stocks Included In GDP?
After reading what GDP includes, it seems the investments portion would mean stocks are included in GDP, right? WRONG! Confusing? Let’s think it out. As mentioned earlier, when you buy a stock, you are buying a piece (or share) of a company’s ownership.
So, if you buy 100 shares of Matt’s Widgets, you are helping fund the company and gaining 100 shares of ownership in return, as well as the privileges we mentioned earlier (voting right, etc.).
The more shares, the more privileges you receive, and the more ownership of the company you have, the more value of the company you hold. However, the activity of buying the shares does not equal an output activity.
Your stock purchase doesn’t directly create (which must happen to be included in GDP) any goods or services.
Sure, the company may use the money you invested to create a billion widgets, and that would be included in GDP, but the stocks themselves only have value in the sense that Matt’s Widgets have value.
Matt’s Widgets, and the services and goods it provides, all count towards GDP, but the stocks do not.
- URGENT BUY: 4 Hypergrowth Cryptos for 2021: Urgent video just released detailing a rare setup in the crypto markets that could send four cryptos soaring
- The Smartest Way to Invest $500 Right Now: It doesn’t matter if you have $500 in savings or $5 million. See what one of America's richest men says you need to do right now.
- Motley Fool Issues: Rare "All In" Buy Alert! All In Stock Buy Signal Has Beaten The Market By 6X
- 25-Year-Old Prodigy Is America’s #1 Stock Picker: Brand-New Pick, Ticker Symbol and All -- FOR FREE