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Output is the total value of goods and services produced in a year. So if a brewer makes a million litres of beer in a year, and each litre is worth €10 then their Output that year is €10 million. If a teacher gives 1 hour of grinds per week at €50 per hour for 36 weeks of the year the teacher’s Output from grinds is €1,800 in the year.
1 hour x 36 weeks x €50 = €1,800
In most cases, Output is similar to the business accounting concept of turnover, with some differences as we will see later. Output is not the same as Gross Value Added: the brewer and the teacher have costs and overheads (Intermediate Consumption) that must be deducted from Output to arrive at the value added. However, sometimes the term 'net Output' is used to describe what national accounts call Gross Value Added.
In general, increased Output is a sign of a growing economy, while Ouput generally declines in a recession. But as Output increases, Intermediate Consumption is also likely to increase – and probably at a different rate than the increase in Output. It is even possible that an increase in Output may lead to a decrease in Gross Value Added. Because of the different concepts being captured by Output and Value Added, Output is a good way to compare economic activity across sectors or across time periods. But Gross Value Added is a more appropriate way to compare and examine economic growth over time. An increase in activity does not necessarily mean an increase in growth and vice versa.
Output is the value of what is produced, rather than what is sold. Sometimes companies will make more than they sell in a year, and they will add to their Stocks; they might also sell off some stock in addition to what they produced in the year. Regardless of stock movement, Output counts production not sales.
We mentioned above that Output and turnover are similar concepts, but they are not always the same thing. The most important cases where these are different are: