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    Macroeconomics: Lecture 4: Measurement of GDP

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    Bakchodi Nhi
    The document discusses different methods for measuring gross domestic product (GDP) and national income. It describes the product method, also called the value added method, which measures the value added by each producing enterprise. It also covers the expenditure method, which measures final expenditures including consumption, government spending, investment, and net exports. Finally, it outlines the income method, which measures payments to factors of production like wages, profits, rents, and operating surplus. The key point is that while there are different methods, they all produce the same value for GDP or national income when measuring the total output, expenditure, or income of an economy over a given period.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    Macroeconomics: Lecture 4: Measurement of GDP

    Uploaded by

    Bakchodi Nhi
    61 views10 pages
    The document discusses different methods for measuring gross domestic product (GDP) and national income. It describes the product method, also called the value added method, which measures the value added by each producing enterprise. It also covers the expenditure method, which measures final expenditures including consumption, government spending, investment, and net exports. Finally, it outlines the income method, which measures payments to factors of production like wages, profits, rents, and operating surplus. The key point is that while there are different methods, they all produce the same value for GDP or national income when measuring the total output, expenditure, or income of an economy over a given period.

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    Lecture-4.pdf

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    The document discusses different methods for measuring gross domestic product (GDP) and national income. It describes the product method, also called the value added method, which measures the value added by each producing enterprise. It also covers the expenditure method, which measures final expenditures including consumption, government spending, investment, and net exports. Finally, it outlines the income method, which measures payments to factors of production like wages, profits, rents, and operating surplus. The key point is that while there are different methods, they all produce the same value for GDP or national income when measuring the total output, expenditure, or income of an economy over a given period.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    61 views10 pages

    Macroeconomics: Lecture 4: Measurement of GDP

    Uploaded by

    Bakchodi Nhi
    The document discusses different methods for measuring gross domestic product (GDP) and national income. It describes the product method, also called the value added method, which measures the value added by each producing enterprise. It also covers the expenditure method, which measures final expenditures including consumption, government spending, investment, and net exports. Finally, it outlines the income method, which measures payments to factors of production like wages, profits, rents, and operating surplus. The key point is that while there are different methods, they all produce the same value for GDP or national income when measuring the total output, expenditure, or income of an economy over a given period.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 10

    MACROECONOMICS

    Lecture 4: Measurement of GDP


    Topics to be Discussed

    1. Measurement of GDP/National Income


     Product Method
     Expenditure Method
     Income Method

    1
    GDP
    Gross Domestic Product measures:
    • an economy’s total production of goods and services
    • Total expenditure on these produced goods and services
    • total income earned from the production of these goods and services.

    Total Output = Total Expenditure = Total Income

    Shoolini School of Business 2


    Measurement of GDP/National Income

    • Value Added or Product Method

    • Expenditure Method

    • Income Method

    Shoolini School of Business 3


    GDP- Value Added/Product Method

    Value added method: Value added method measures the value added
    by each producing enterprise in the production process in the domestic
    territory of a country in an accounting year

    GDP at Market Price = Value of total production of


    goods and services – Value of total inputs used

    Shoolini School of Business 4


    GDP- Income Method

    Income method measures national income from the side of payments made
    to the primary factors of production in the form of rent, wages, interest and
    profit for their productive services in an accounting year
    Components of Income Method
    1. Compensation of employees- the reward or compensation paid to
    employees for rendering productive services
    • It includes wages and salaries, employer’s contribution to social
    security schemes, dearness allowance, bonus, house rent allowance,
    leave travelling allowance etc.)
    2. Operating surplus- includes rent, profit and interest
    3. Mixed income of self employed: Income of farmers, doctors,
    barbers etc, and unincorporated enterprises like small shopkeepers,
    repair shops, retail traders etc.

    NNPFC /National Income = 1+2+3


    GDP- Expenditure Method
    Expenditure method measures final expenditure on Gross Domestic
    Product at market price during an accounting year

    • Components of GDPMP:

    – Private final consumption expenditure

    – Govt. final consumption expenditure

    – Gross fixed capital formation

    – Net Exports

    GDPMP = C + G + I + (X-M)
    Summary

    Different methods to measure GDP and national income give the same
    value.

    National income = national expenditure = National product

    All other aggregates can be calculated from GDP


    THANK YOU 

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