hello boys welcome back to our teaching videos of Economics now first of all I hope you had a very good uh holiday just now and it's going to have a even better holiday in the remaining days right so uh to everyone certainly okay hope you guys have a very healthy very happy holiday right now so what we're going to do for this series of videos like I mentioned before the holiday right I'm going to shoot at least the videos on chapter 15 and chapter 16 of our economics syllabus right now depending on the time right let's see whether we have time to uh let's see whether I have enough time to also go on for a brief introduction of chapter 17 and chapter 18 right but no promise I really need to see whether I have enough time for that because I also have some IH Works to do and other works to do right all right now without further Ado let's get started other now remember boys I know we have talked about GDP before the holiday but I'm going to treat as if we have not learned anything to be a detailed teaching of chapter 15 and chapter 16. now the structure it's going to be like this first I'm going for each part I'm going to do the teaching on textbook and then I'm going to do another video on the past paper questions right so if you feel like you don't need to listen to the explanation again but you want to do the revision on the past paper feel free to do so okay now let's really get started now this is the video one for the definition of GDP okay this part is a very important yet very difficult part okay it measures 1 effect something we call national income and when it comes to national income we have two we have both GDP and gni now don't worry too much let's start with GDP first here let's go to page two of your textbook you see the definition here the definition of GDP is this right you see I've already marked quite a lot of things here so be very careful GDP refers to the total market value this is the first thing we need to know right of the production second thing right of all rpus Resident producing units okay often of an economy over a period of time usually okay usually a year now you see I have four markings here okay so let's look at each of them in detail okay now first of all we need to have value okay yeah so if something happens to be of zero dollar Unfortunately they would not be in GDP okay Mr Chen can you give me some example yes for example tier work okay Adam is a very kind-hearted student right he do a lot of volunteer work right look definitely a production definitely involves input and turn input into output right definitely production but unfortunately since those are volunteer work right that would not be counter in GDP because the market value for volunteer work is zero by definition right so by definition zero okay another example housework you can tell your mom right why you're not doing housework because housework does not involve any market value or okay production yeah there is production but there is no market value right on being efficient I do not want to waste effort on things that do not come towards GDP don't tell your mom I teach you that okay okay hold on so here remember first you need to have value okay like one second point it needs to be of production okay the production there are two points we need to be aware of okay number one it needs to be of real production the counterpart of reproduction is something we call Financial production and financial investment okay Financial investment which means unfortunately the price of stock and bonds no matter how much you spend will not be counted in GDP why America basically it is uh it is something we call a right you can buy a right to become a boss 10 points make your pawns I buy something okay I buy a right so that you owe me money okay it's all right there is no production involved right Michael promise basically is buying a promise so there is no production no input into output okay hold on so this is point number one point number two production not just of any real production okay it should be of final product okay that's a make a final product it means that intermediate Goods intermediate Goods would not be should not be counter or I should put it this way okay later on when we talk about expenditure approach and value added approach you will understand you know that intermediate product also counts but after they accounted for the first time the second time they should be deducted away from the final product that don't worry too much more on that later I do not like the way they put it right final product intermediate product I think this is a very confusing way to put it right you will understand more once we go to both a value-added approach or sometimes we call a production approach and when we go to expenditure approach you will understand more okay if we count the intermediate and the final product we have the problem of double counting again more on that later okay okay the second part now the third point third point it must be by something we call resident producing unit of an economic territory right but let's be more specific by rpu Resident producing unit so here let's go back to page two okay okay here we come okay it shouldn't be here instead it should be in the main uh main contact okay now because this is very important according to the definition of rpu you have to you have to fulfill either of your a requirement first you have engaged okay you intend to engage engage in production activity in that economy for one year at least okay over a year example number one okay let's say example number one example number one a Leo Chen okay Leo Chen stayed in Hong Kong for 32 years okay you saw that so here I've been staying in Hong Kong for 13 years 32 years and have been working as a teacher for five years so I've been in production active activity for at least five years here right so he is okay deal Chang is an rpu of Hong Kong let's say now let's assume I have money right and then I hire a foreign domestic helper okay and let's say okay uh right now is a January okay let's say I hire that foreign domestic helper uh last year in September okay in September okay September right October and November December okay only three months but if I hire that foreign domestic helper with uh two year contract things will be different because even though only three months in Hong Kong all the time but there is an intention make an intention or team the contract learning contractor you will be working in Hong Kong for continuous two years there is an intention in this case even though only three months of work this is also an rpu because we see an intention to work for more than one year okay you know that GDP only counts the value of production by our pu okay what does that mean let's say if an American okay work in Hong Kong for two months and then leave okay he or she will not be an rpu because has not stayed for a year or has no intention to stay for one year okay final point here in a given period remember it needs to be in that particular year okay okay of course there are some exceptions to these rules but do not worry right we will talk about those exceptions in past paper okay now but just to make our life simpler okay okay case number one let's say and infrastructure project most of the time okay most of the time we uh infrastructure project cannot be finished within one year in terms okay remember only counts the value added of the year guys more on that later when we go to production approach okay a second case a second case now this one is a little bit perplexing you just need to memorize that you know a lot the estimated foreign value of self use flat also counts in GDP you knowledge how it works is that it is assuming you as the owner is renting to yourself rent means there is rental surface Yahoo services okay now don't ask me why okay I do not fully understand why it counts as well okay it doesn't make sense to me but this is how GDP works okay so next time your mom says you tell her no no no Mom you have not learned economics or you do not learn well enough okay I already have GDP by owning the house I am generating the estimated rental value of a self-used flat by just owning the house and using the house again don't tell her I teach you okay I do not want to receive complaints from your mom okay okay you will see this in past paper question again now let's look at one example in your textbook and then we wrap up this video on the uh with the next page okay which of the following would be in the in the calculation with circulation calculation of Hong Kong's GDP for 2014. now first o h allowance paid by the government whenever you see the word allowance we have a name for this it's called transfer payment transfer payment basically you pay money to people without doing anything oh allowance by being old okay it does not require any production in return okay so that you know little although there is value come on but there is no Productions no production no production okay therefore doesn't count in GDP okay unfortunate this one that's on campus market value of a flat built in 2013 but sold in 2014 gauge High builds in 2013. so the value added or it should be counted in 2013 not 14. let us saying I would argue let's say the market value is 1 million if in that year the value added is only like 0.3 million then only that 0.3 million value but only part of the market value is counted only the value added part is counter okay so unfortunately this is also not correct the salary no salary because salary remember is for labor surface when there is service there is production therefore C is the answer we want um they are talking about second hand war is boys remember the price of the second hand handbag does not count guys but now we are talking about the salary of the person working in a second hand in a second hand and back it is a retail service okay finally rental income from a property in Canada if this is Canada then it does not happen in Hong Kong not in Hong Kong therefore it also does not count for this video let's look at one more page and then we move on to the Past paper of this chapter okay okay production by household for their own consumption let us production their own consumption okay when we talk about own consumption there is no market value so basically is a zero dollar guys here non-market activity or legal transaction in theory it counts but in reality since they are illegal when it comes to Illegal there is no record okay second hand Goods does not count because it is already counted once foreign basically this one salary okay dividends and interest from bonds dividend from stock interest from bonds both of them counts because the price of stock and bond does not count but dividend and interest because remember these two are the returns from stock and bomb these are the return from my computer kind of like a landing surface since there is a Surface okay capital gain does not count okay I buy a stock at 10 I sell at a hundred dollar I earn 90 dollars but remember stock and bonds the price does not count no production okay or I should say no real production okay financial asset the same commission salary right and finally transfer payment here we just talk about transfer payment basically money given to someone without any production okay now therefore transfer payment no production not going to count okay Homer and that should conclude our first video on teaching of a definition of GDP next video let us then talk about the past paper questions in this part okay see you very soon in the next video see you then bye