How GDP is Calculated?

How GDP is Calculated

What is GDP?

Gross Domestic Product (GDP) is total market value of all final goods and services produced within a country and within particular time period.

There are two types of GDP

Nominal GDP :- Current year production valued at current year price.

Real GDP :- Current year production valued at base year price.

How GDP is Calculated?

Real GDP calculation are used to find a certain real growth because it is inflation adjusted.

Gain from re-sale are excluded but services provided by the agent are counted in GDP calculation.

Transfer payment are excluded as the income received but no income or services occurred.

3 Approaches of GDP

Output Approach :- It add total market value of final good and services.

Income Approach :- It basically is what the factor of production earn wages of labour, profit of enterprize, land-rent, interest etc.

Income method measures the some total of all payments received by production.

Expenditure Approach :- In this approach, the total value of spending get firms recover for the final good and services which they produce.

Read What is Economy? Types of Economy