29 January 2016

Two ways of calculating  GDP

1. EXPENDITURE APPROACH

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

GDP= C+ Ig + G + Xn

C= Personal Consumption Expenditures

Ig= Gross Private Domestic Investment

G= Government Spending

Xn= (Exports - Imports)

(Most favorable, because it can be proven by receipts, paper work, documents)

2. INCOME APPROACH

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

WILLY REST IN PEACE + STATISTICAL ADUJUSTMENT 

GDP= W + R + I + P + S

W= wages

R= Rent

I= Interest

P=Profits

S= Statically Adjustment

       1. In direct business taxes

        2. depreciation (consumption of fixed capital)

         3. Net foreign factor payment