GDP Flashcards
What is GDP?
GDP is the measure of national income.
What are the three approaches to calculating GDP?
The production approach
The expenditure approach
The income approach
What is the production approach calculation?
Gross value of output - Values of intermediate consumption
What is gross value of output?
The value of sales or revenue from the production of new goods and services in an accounting period.
What is value of intermediate consumption?
The value of goods and services consumed by the production process.
What is the expenditure approach calculation?
C + I + G + NX
C - consumption
I - investment spending
G - government spending
NX - net export
What is consumption in the expenditure approach? 4 points
All private consumer spending within a country’s economy, including, durable goods (items with a lifespan greater than three years), non-durable goods (food & clothing), and services.
What is investment spending in the expenditure approach? 4 points
The sum of a country’s investments spent on capital equipment, inventories, and housing.
What is included in government spending in the expenditure approach? 3 points
Includes salaries of government employees, road construction/repair, public schools, and military expenditure.
What is net export in the expenditure approach?
A country’s total exports less total imports.
What is the income approach calculation?
TNI + ST + D + NFFI
TNI - Total national income
ST - Sales tax
D - depreciation
NFFI - net foreign factors income
What is total national income in the income approach? 4 points
The sum of all wages, rent, interest, and profits.
What is sales tax in the income approach?
Consumer taxes imposed by the government on the sales of goods and services.
What is depreciation in the income approach?
Cost allocated to a tangible asset over its useful life.
What is net foreign factors income in the income approach?
The difference between the total income that a country’s citizens and companies generate in foreign countries, versus the total income foreign citizens and companies generate in the domestic country.
