MEASURING

NATIONAL
INCOME
GROUP 7 Reporters:
ANDREA TAGO
ELLEN JOY SEVILLA
JEFFREY SALAZAR
MARLOU SIOBRIAN
ANNIA SORONIO
Did you know

Gross domestic product (GDP) is considered the measure of

an economy’s productivity.
It is one of the vital components of an economy.
Learning objectives
01 Determine the factors includes in the computation for gross domestic
25 not.
product or GDP and those that are

02 Differentiate and understand the concepts in each of the three

methods of computing the GDP 20
03 Perform the methods of computing the GDP, and arriving at the same
answer
15

04 Differentiate and compare nominal GDP and real GDP, and learn how to
compute for each
10
05 1.Determine how important the concept of GDP is, and how it
translates as a measure of a country’s economic well-being
5
06 Interpret the concept and the equal importance of gross national product
GNP and distinguish it from GDP.
0
GROSS DOMESTIC
PRODUCT: A MEASURE OF
THE NATION’S OUTPUT
GROSS DOMESTIC PRODUCT (GDP) is the total market value of the final
goods and services produced within a country during a given period.

The total market value for GDP calculation is not only comprised of
tangible products but also private and public services. However, not
all products and services with market value should be counted in the
GDP, but only those considered as final goods and services or end
products.

FINAL GOODS AND

SERVICES
FINAL GOODS AND SERVICES is the end product of process. It is the
01 product or service that is actually being purchased by a particular
consumer.

INTERMEDIATE GOODS OR
SERVICES are the other goods used in
02 the production.
-Not included for final goods and
services.
 CAPITAL GOOD
-any intangible assets usually bought or
invested on by an organization for the
purpose of producing goods and services.

In business perspective,
capital goods include:
Government:

Machineries Public Roads

Office buildings Airports
Factories Seaports
PRODUCE WITHIN THE COUNTRY
Gross Domestic Product only measures the final
goods and services produced by the economic
activities within the country.

DURING A GIVEN PERIOD

GDP is only concerned with new or current
production. Old output is not counted in the current
GDP to avoid DOUBLE COUNTING.
 The Expendeture Method
In Measuring GDP
It is now clear that GDP is the total market value of the final
goods and services produced within a country during a given
period. These goods and services are now going to be
purchased, of course, and be used by some economic player.
Examples are a family buying a kilo of rice or a company
paying for its employees' services. It is then important to
know not only how much was produced but also who buys
and for what purpose the goods and services are for.
 According to economists, there are four categories of economic
players that use the goods and services that make up the GDP in a
year. These are the households, firms, governments, and the foreign
sector (the users of domestic products who are based in another
country). Moreover, the total value of money that these groups spend
on different goods and services should be equal to their market value.

Hence, we can then measure GDP using either one of two methods:
(1) by adding the total market value of all the final goods and
services produced in a country, or (2) by adding up the total value of
money spent by the households, firms, government and foreign
sector on final goods and services and subtracting the money spent
to purchase imported goods and services.
Table 7.1 gives the peso values for each of the components for
the Philippine economy in 2012. It shows that the GDP for the
Philippines in 2012 was more than Php 10 trillion at current
prices, averaging Php 114,740.15 per person or the GDP per
capita. GDP per capita is the income per person in a certain
city/country. This is computed as Total GDP divided by Total
Population.
 •Consumption expenditure, or simply consumption, is
the spending by households on goods and services
such as food, clothing, and entertainment.

•Investment is the spending by firms on final goods and

services, primarily capital goods. It is also the sum of
expenditures on equipment, structure, and inventories.

•Government purchases are the final goods and

services bought by the national government and
local government units.

Transfer payments are payments made by the government

for which no current goods and services are produced or
received. Examples of these are social security benefits,
unemployment benefits, and pensions paid to retired
government workers.
01
• Net exports are simply the
difference between exports and
imports, which is computed as
Exports minus Imports.
The relationship between GDP and
expenditures on goods and
services can be expressed in the
following equation:

Y = C + l + G + NX

02 - Exports are domestically

produced final goods and
services that are sold abroad. Where:

Y = gross domestic product

03
-Imports, meanwhile, are C = consumption expenditure
purchases by domestic I =investments
buyers of goods and
G = government purchases
services that were
produced abroad.
NX = net exports
 GDP and the Total
Incomes of Capital Labor
Labor income - is the total wages, salaries, and incomes of the
employed and self-employed of most economies, and this
comprises 2/3 of the total GDP

Capital Labor - is the total payments made to owners of

physical capital, such as the rent paid for office building, profits
of business owners who sell factories and machines, as well as
royalty fees paid for copyrights and patents, and is equal to
one-thirds of the GDP.
 Nominal GDP vs. Real
GDP
Nominal GDP Real GDP
The market value of The market value of
the final production the final production
of goods and of goods and services
services within a within a country in a
country in a given given period adjusted
period evaluated at for price changes that
current market may have occurred
prices. over time.
For instance: