Gross Domestic Product

GDP
 GDP
• GDP shows the economic health and growth of a country
• It includes (Only) the Monetary/Market value of New & Final Goods
and Services produced in a country during a particular year.
• In-process goods are not included in GDP. (it can result in
duplication)
• GDP= C+I+G+(X-M) where
•C = Consumption by people of that country during a year
•I = Investment made in that country during a year
•G = Government spending during a year
•X = Exports earnings in a year
•M = Payments for the Import of Goods in a year
(X-M) = Net Foreign Exchange earnings (Balance of Trade)
GDP
• Domestic means the earnings made within the boundaries of that
country are included.
• Goods and Services produced by the factors of production of the
country and resources of the country
• We can Summarize as follows:
•GDP is
• The value of Final GOODs & SERVICES
• Produced by the Local and Foreigners (Both Inclusive)
• Within the boundaries of a country (Territorial
Boundaries)
• In a Particular Year
Measurement of GDP
Methods of Measuring GDP
• There are three Methods:
• Expenditure method
• Income method
• Production Method
REAL vs NOMINAL GDP
• Nominal GDP = Current Year Price X Production
• Real GDP = Base Year Price X Production (Adjusted
for the impact of inflation over the years)
• Real GDP is inflation-adjusted GDP
 Expenditure Method

GDP = C+I+G+(X-M)

NDP = GDP - Depreciation