GDP (Gross Domestic Product)
Ø Total market value of all the final goods and services produced in a specific time period, often annually
GNI (Gross National Income) –
GDP at market price
+
Tax less subsidies on product & import (Net receivable from abroad)
+
Compensation of employees (Net receivable from abroad)
+
Property income (Net receivable from abroad)
GNP (Gross National Product) –
GDP
+
Total Capital gain from overseas investment
-
Income gain by foreign nationals domestically
GNP = GDP + NP (Net income from assets abroad (Net Income Receipts))
# According to National Income Accounting, there are three ways to compute GDP
1. Expenditure wise
2. Income wise
3. Product wise
1. Expenditure Wise -
GDP =
Consumption
(Food, household, medical expenses, rent etc.)
+
Gross Investment
+
Govt. Spending
(Sum of Govt. expenditure on final goods & services)
+
(Export – Import)
i.e GDP = C + I + G + (X-M)
2. Income Approach –
GDP =
Compensation of employee
(Wages, salary & other employ supplement)
+
Property income
(Corporate profit, Proprietor’s incomes, interest and rents)
+
Production taxes and depreciation on capital
GDP at market price
Ø Value of output at market prices after adjusting for the effect of indirect taxes and subsidies on the price.
Market price
Ø The economic price for which a good or service is offered in the market place.
GDP at factor cost
Ø The value of output in terms of the prices of factors used in its production.
GDP at factor cost = GDP at market prices – (indirect tax – subsidies)
3. Product Approach
# Real GDP or GDP at constant price –
Ø Value of today’s output at yesterday price
# Nominal GDP or GDP at current price –
Ø Value of today’s output at today’s price
