GDP

Question 1

What is the formula for the product approach? Using the chair example.

Answer 1

The amount the chair is sold for MINUS the total cost of the material and labour to make the chair

Question 2

What is the formula for the expenditure approach? And what does each letter stand for

Answer 2

C + I + G + Nx

C = Consumption
I = Investment spending
G = Government spending
Nx = Net exports

Question 3

How is net export worked out in the expenditure approach?

Answer 3

Exports MINUS imports

Question 4

What is included in government spending in the expenditure approach?

Answer 4

Salaries of government employees, road construction/repair, public schools and military expenditure

Question 5

What is the formula for the income approach? And what does each letter stand for?

Answer 5

TNI + ST + D + NFFI

TNI = Total National Income
ST = Sales Tax
D = Depreciation
NFFI = Net Foreign Factors Income

Question 6

What is included in TNI in the income approach?

Answer 6

Wages, rent interest and profit

Question 7

What is consumption ?

Answer 7

All private consumer spending in a country’s economy, including durable goods, non durable goods and services

Question 8

What is investment spending ?

Answer 8

The sum of a country’s investments spent on capital equipment, inventories and housing

Question 9

What is sales tax?

Answer 9

Consumer taxes imposed by the government on the sale of a good/service