In the U.S. national accounts, the value of GDP is measured in dollars. Specifically, the market value of all 4th-quarter production included in the measure (again accounting for the season) was a bit over \$7.4 trillion. This is the value assigned by the Bureau of Economic Analysisn (BEA) to that production and called "GDP". Likewise, for the period three months prior, the figure was a bit over \$7.3 trillion. We say "GDP" increased by about \$81 billion at quarterly rates.
So if GDP purports to measure the dollar value of production, why don't we just say the \$81 billion represents the increase in the value of production? Well, we do! It is the (market dollar) value of measured production. The problem, such as it is, is that a dollar value doesn't really connect back to production of real goods and services. To see this, consider what would happen if we used shares of Apple stock in place of the dollar. If we could have purchased all third-quarter production with Apple shares at the July 1 open of \$212.09 per share, we would need to exchange 34.6 billion shares. To purchase all fourth-quarter production with Apple shares on the October 1 open of \$229.52 per share, we would need only 32.4 billion shares. That is, production value fell by a couple billion Apple shares. So did production value go up (dollars) or down (Apple shares)?
The answer is found in neither. The discrepancy is driven by valuing dollars less and Apple shares more. This has nothing to do with production of actual goods and services. To get a “real” sense of production value over time, we need something more consistent. One way might be to try and imagine an exhange between our fourth-quarter selves and out third-quarter selves. What on earth does that mean?
