Gross Domestic Product

Calculating GDP
1. Consumer Expenditure ( Consumption) – so consumers expenditure is personal mainly household

spending on goods and services.
2. Investment Expenditure – So investment expenditure is investment spending refers to the effort

associated with stimulating production by purchasing capital goods, which are the assets owned by a
business used to produce its product.
3.Government expenditure on goods and services. – Government spending refers to money spent by
the public sector on the acquisition of goods and provision of services such as education, healthcare,
social protection, and defenses.
4. Net export expenditure –

Net export refer to the value of a country’s export earnings on the
sale of goods and service abroad, minus its expenditure on imported goods and services.
Calculating GDP Vocabulary
Durable Good: A good that last three years or more such as a car or refrigerator . Durable goods are
consumer goods that have long lifespan and don’t wear out quickly.
Inventory: Goods that has been produced, but not yet been sold its refers to act of accounting or listing
item. Inventory is current asset and refers to all stock in the various production stages. By keeping stock,
both retailers and manufactures can continue to sell or build items.
National Income: Includes all income earned: wages, profits ,rent, and profit income. A variety of
measures of national income and output are used in economics to estimate total economic activity in a
country or region, including gross domestic product, gross national product, net national income, and
adjusted national income.
Nondurable Good: A good that lasts less than three years, such as food and clothing. durable good or a
hard good or consumer durable is a good that does not quickly wear out or, more specifically, one that
yields utility over time rather than being completely consumed in one use
Service: Product which is intangible (in contrast to goods) such as entertainment, healthcare, or for
other purposes. A good is a tangible item that consumers desire or own. A service is not a tangible or
physical entity but is still sought after by consumers. Often, a service can also be performed at a
distance. Together the term goods and services refers to what consumers are consuming and spending
money on.
structure :is an arrangement and organization of interrelated elements in a material object or system, or
the object or system so organized. Material structures include man-made objects such as buildings and
machines and natural objects such as biological organisms, minerals and chemicals.
Calculating GDP Vocabulary (cont.)
Trade balance: gap between exports and imports. Balance of trade can be measured in terms of commercial
balance, or net exports. Balance of trade is the difference between the monetary value of a nation's exports and
imports over a certain time period. Sometimes a distinction is made between a balance of trade for goods versus one
for services.
Trade Deficit: exists when a nation ‘s imports exceed its export and is calculated as imports –exports.
Countries can manage trade deficits by promoting exports, reducing imports through import substitution,
currency devaluation, implementing trade policies, and promoting foreign investment
Trade Surplus: exist when a nation’s export exceed its important and is calculated as exports – imports.
And Export surplus is the excess of exports over imports. While generally it is a positive indicator, it proved
disadvantageous to India due to the following reasons: (a) Commodities were not available to Indians but
were being exported. Ignoring the domestic needs, goods were being exported for the advantage of
Britain.
Gross National Product
-Gross National Product ( GNP ): Includes what is produced dornestically and what is produced
domestic labor And business abroad in a year.
-includes only what is produced within a country’ borders
-adds what is produced by domestic business and labor abroad
-Subtracts out any payments sent to other countries by foreign labor and business located in the U.S.
Net National Product
- Net National Product (NNP): GDP minus depreciation. Gross National Product takes into account the
manufacturing of tangible goods such as vehicles, agricultural products, machinery,
-Depreciation: The process by which capital ages loses value. Depreciation shows the expense of using an
asset over time and is unrelated to its physical condition.
-National income : all income to business and individuals. National income is the total market value of
production in a country's economy during a year. It can be measured alternatively and equivalently in three ways:
-Personal income: Income made by individual. This measures all of the income that is received by individuals,
but not necessarily earned. Examples of this include social security benefits, unemployment compensation,
welfare payments, benefits for veterans, and food stamps. Individuals also contribute income which they do not
receive.
- Net National Product (NNP) Is calculated by taking GNP and then subtracting the value of how much physical
capital is worn out, or reduced in value because of aging, over the course of a year. The process by which capital
ages and loses value is called depreclation. The NNP can be further subdivided into national income, which
includes all income to business and individuals, and personal income, which includes only income to people.
THAT’S ALL THANK YOU

Gross Domestic Product

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Calculating GDP

1. Consumer Expenditure ( Consumption) – so consumers expenditure is personal mainly household

2. Investment Expenditure – So investment expenditure is investment spending refers to the effort

4. Net export expenditure –

-includes only what is produced within a country’ borders

-adds what is produced by domestic business and labor abroad

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