Example
Country 1:
A dealer imported a car from China for $50,000 and offered it for $100,000. Value added = Gross domestic product (GDP) = $50,000 per capita income.
Country 2:
A manufacturer who imported copper wire and magnets from China for $50,000 and made an electric motor for $100,000. Added value = per capita income = $50,000.
In both cases, GDP = value added = per capita income = $50,000. But is it possible to say that the economy of country 1 = the economy of country 2?
It is a difficult question and not as clear cut as it seems.
What we do know is this…
The first is income from trade and the second is income from manufacturing.
The first needs cleverness and the second needs skill.
The first is the import of a finished product and the second is a raw import.
The first consumes hard currency and the second is able to generate hard currency.
So, despite the identical numbers, the economic structure is completely different, and this difference may not affect the output of this year or the next, but it largely determines the so-called possible GDP in the long run.
This is exactly the same as evaluating two companies whose profits are the same in 2022, but the growth rate in their profits is completely different in the long run.
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