WAYS OF CALCULATING GDP

Expenditure Approach

- We add up all of the spending on final goods and services produced in a given year.

- Formula: GDP= C+IG+G+XN.

Income Approach 

- We add up all of the income that resulted from selling all final goods and services produced in a          given year.

- Formula: GDP= N+R+I+P+Statistical adjustments.

* Compensation of Employees: It includes wages, salaries, franking benefits, social security contribution, health and pension plans.

* Rents: income of property owners.

* Interests: income that comes from money.

* Corporate Profits: income of company stockholders.

* Proprietor's Income: income from sole proprietorship and partnerships.

* Statistical Adjustments:

   - Indirect Business Taxes.

   - Depreciation.

   - Net Foreign Factored Payment.

- Rarely used because people lie about their age.

NET DOMESTIC PRODUCT (NDP)

GDP - depreciation (consumption of fixed capital).

NET NATIONAL PRODUCT (NNP)

GNP= GDP + net foreign factored payment.

Budget Surplus/ Deficit

- Formula: government purchase of goods and services + government transfer payment - government   tax and fee collection.
- Surplus (-) and Deficit (+).

Trade Surplus/ Deficit

- Formula: export - import.

National Income

- Formula: compensation of employees + rental income + interest income + corporate profits + proprietor's income.

                                                   OR

- Formula: GDP - indirect business tax - depreciation - net factored payment.

Disposable Personal Income

- Formula: national income - personal household taxes + government transfer payment.