The most commonly reported measure of aggregate output, the gross domestic product (GDP), is the market value of all final goods and services produced in a country during the course of the year. This measure excludes two sets of items that at first glance you might think would be included. Purchases of goods that have been produced in the past, whether a Rembrandt painting or a house built 20 years ago, are not counted as part of GDP, nor are purchases of stocks or bonds. None of these enter into GDP because they are not goods and services produced during the course of the year. Intermediate goods, which are used up in producing final goods and services, such as the sugar in a candy bar or the energy used to produce steel, are also not counted separately as part of GDP. Because the value of the final goods already includes the value of the intermediate goods, to count them separately would be to count them twice. Aggregate income, the total income of factors of production (land, labor, and capital) from producing goods and services in the economy during the course of the year, is best thought of as being equal to aggregate output. Because the payments for final goods and services must eventually flow back to the owners of the factors of production as income, income payments must equal payments for final goods and services. For example, if the economy has an aggregate output of $10 trillion, total income payments in the economy (aggregate income) are also $10 trillion.
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