Unit 2- Two Ways of Calculating GDP (Gross Domestic Product)

Unit 2- Two ways of Calcuating GDP 

1/29/2016

http://youtu.be/mgtVQQALWQI watch this of a useful way to calculate GDP.

Expenditure approach: add up all of the spending on final goods and services produced in a given year. 

=Formula | GDP= C + IG + G + XN (remember, exports - imports first before you add it to the rest of the formula) 

Income Approach: you add up all the income that resulted from selling all final goods and services produced in a given year. 

=Formula | GDP= wages + rent + interest + profits + statistical adjustments 

Statistical adjustments are known as:

-Indirect business tax

-Deappreciation

-Consumption of fixed capital 

- Net foreign factor payments

NB: this is a useful way to remember the formula 

: WILLY REST IN PEACE.