GDP Flashcards
What is GDP ?
It is the most widely used measure of national income. Gross means Total, domestic refers to the home economy and product means output.
What are the three ways of measuring GDP?
Income, output and expenditure
How does the output method work?
The output method measures the value of output produced by industries such as manufacturing, catering construction and agricultural industries plus taxes and less subsidies on products.
How does the income method work?
The value of an output produced is based on the costs involved in producing that output. These costs include wages, rent interest and profits. All these factors represent income paid to factors of production. In using this measure it is important to include only payments received in return for providing a good or service.
How does the expenditure method work?
The expenditure approach to calculating gross domestic product (GDP) takes into account the sum of all final goods and services purchased in an economy over a set period of time. That includes all consumer spending, government spending, business investment spending, and net exports.
What is money GDP?
It is the total output measured in current prices.
What is real GDP?
It is the total output measured in constant prices.
What’s the equation used to measure real GDP?
Real GDP = Money GDP X Price index in base year / price index in current year
What is GNI?
GDP plus net property income from abroad gives gross national income, therefore it is the total output produced by a country’s citizen wherever they produce it.
