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February 27, 2024 

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EUROPEAN UNION: The economical and political integration of a dozen European nations created by the Maastricht Treaty signed in 1992. The twelve nations forming the European Union (commonly abbreviated EU) are Belgium, Denmark, Greece, Germany, Spain, France, Ireland, Italy, Luxembourg, Netherlands, Portugal, and Great Britain. Three additional nations that have joined the original dozen are Austria, Finland and Sweden. The Economic Union was actually one of several steps by European nations after the end of World War II to promote integration. This Economic Union was established to reduce or eliminate many tariffs and nontariff barriers, create a single monetary unit (the euro), establish of a common military and defense policy, and centralize monetary policy.

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STATISTICAL DISCREPANCY:

The official adjustment factor in the National Income and Product Accounts that ensures equality between the income and expenditures approaches to measuring gross domestic product. This is one of several differences between national income (the resource cost of production) and gross (and net) domestic product (the market value of production). It is also the key difference between gross domestic income and gross domestic product. This statistical discrepancy tends to be relatively small, usually less than 1 percent of gross domestic product.
The statistical discrepancy is the official "fudge factor" that ensures perfect equality between gross domestic product and gross domestic income in the National Income and Product Accounts. While the statistical discrepancy is officially "added" to gross domestic income when calculating gross domestic product, the actual value can be positive or negative. The value of the statistical discrepancy is whatever it needs to be to equate the income and expenditure approaches to measuring gross domestic product.

In principle, gross domestic product measured from the expenditure side SHOULD be exactly equal to gross domestic product measured from the income side (that is, gross domestic income). In reality, these two approaches to measuring gross domestic product do not yield identical results. They should, but they do not. This statistical discrepancy is thus used to ensure that everything balances, that there is perfect equality between gross domestic product measured from either approach.

The reason that these two approaches do not add up exactly is that the economy is extremely complex and measurements are not perfect. The economy has over a hundred million workers employed by hundreds of thousands of firms, producing trillions of dollars worth of every conceivable good or service imaginable. Even though the U.S. economy has the best data collection system in the history of humanity, it is not perfect. Errors are made. Production and income are missed or double counted.

To appreciate the enormous task facing the data-crunchers at the Bureau of Economic Analysis, try counting the number of people meandering about a shopping mall on any given Saturday afternoon, preferably right before Christmas. And do it in two different ways. First, count heads. Second, count fingers, then divide by ten. In principle, both numbers SHOULD be the same. In reality, a few feet are likely missed and/or a few heads are bound to be double counted. It happens. The world is not perfect.

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STATISTICAL DISCREPANCY, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2024. [Accessed: February 27, 2024].


Check Out These Related Terms...

     | national income and gross domestic product | national income and net domestic product | indirect business taxes | net foreign factor income | capital consumption adjustment | business transfer payments | government subsidies less current surplus of government enterprises |


Or For A Little Background...

     | national income | gross domestic product | gross domestic income | gross domestic product, income | production | product markets | National Income and Product Accounts | Bureau of Economic Analysis | National Bureau of Economic Research |


And For Further Study...

     | factor payments | circular flow | business cycles | gross domestic product, expenditures | gross domestic product, ins and outs | gross domestic product, welfare | real gross domestic product | gross national product | government functions | net domestic product | personal income | disposable income | gross domestic income |


Related Websites (Will Open in New Window)...

     | Bureau of Economic Analysis |


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