Marconomy

ABBE1023

1

Measuring Domestic Output,

National Income and the Price

Level

2

 GDP is the total market value of all final goods and

services produced annually within a country’s borders.

GDP

Calculation

Methodology

Expenditure

Approach

Income

Approach

Value Added

Approach

3

Gross Domestic Product

Gross National Product

The total market value of final goods and

services produced during a given period

within the geographic boundaries of a

country regardless of by whom

The total market value of final goods and

services produced during a given period

by the citizens of a country no matter

where they live.

The goods and services are produced

domestically

The goods and services are produced by

the “nationals” of the country

4

5

GDP

- Income earned by the test of the world

+ Income earned from the rest of the world

= GNP

GNP

- Consumption of fixed capital / Capital consumption allowance / Depreciation

- Indirect business taxes

= National Income

GDP

- Consumption of fixed capital / Capital consumption allowance / Depreciation

= NDP

6

Compensation

of employees

Proprietors’

income

Corporate

profit

Rental

income

Net

interest

National

Income

7

REAL GDP

NOMINAL GDP

Nominal GDP

Nominal GDP measures the value

of the entire output produced

annually within a country’s borders

at today’s price.

Real GDP

Real GDP is the value of the entire

output produced annually within a

country’s borders, adjusted for

price changes (at base year

prices).

Nominal GDP = (Current-year

prices X Current- year quantities)

Real GDP = (Base-year prices X

Current- year quantities)

8

 Economic Growth is measured by increases in Real GDP

9

Business cycle: Recurrent swings (up and down) in Real GDP.

10

GDP

doesn’t

measure

some very

useful

output

because it

is unpaid

GDP does

not

measure

improveme

nts in

product

quality or...