Gross Domestic

Product
 What is GDP?
• Gross domestic product (GDP) is a
monetary measure of the value of all final
goods and services produced in a period
(quarterly or yearly).
• Nominal GDP estimates are commonly
used to determine the economic
performance of a whole country or region,
and to make international comparisons.
 Components of GDP
• • Consumption (C)
• • Investment (I)
• • Government Spending's (G)
• • Net Exports (X – M)
 GDP: Two Methods

Expenditure method (product market) – what is produced is also purchased

Income method (resource market) – the total value is the sum of all the parts
To Calculate GDP
Consumptio
n It is Household Final Consumption Expenditure
 It Includes
• Durable Goods
• Non-Durable Goods and
• Services

Eg: Food, House Holds, Medical Expenses, Rent, Jewellery,

Gasoline, etc.
 Investment
 Investment by Business or Households in Capital.
 It Includes
• Construction of New Mine.
• Purchase of Machinery or Equipment for Factory.
• Purchase of software.
• Expenditure on New Houses.
• Buying Goods and Services.

 Investments on Financial Products is not included in

Investments.
 Government Spending's
 Total Government Expenditures on Final
Goods and Services.
 It Includes
• Investment Expenditure by Government.
• Purchases of weapons for Military.
• Salaries of Public Servants.
It does not include any transfer
payments, such as social security or
unemployment benefits.
 Net Exports (X – M)
Gross Exports (X)
•All Goods and Services Produced for
Overseas Consumption.

Gross Imports(M)
•Any Goods or Services Imported for
Consumption.
Three Variations on GDP

Per Capita GDP

Real GDP vs. nominal GDP

GDP vs. GNP

Per capita GDP = GDP ÷ population
Average level of income in a nation
Not income distribution

Nominal GDP – current production at current

prices
Real GDP – current production at base
year prices
To convert, use the GDP deflator
GDP Deflator = (Nominal GDP / Real GDP) *
100

GNP – total market value of all final goods

and services produced in a year from factors of
production (resources) owned by country’s
residents
GNP is produced with the resources owned by the
country (anywhere in the world).
GDP is produced inside the country’s borders.
Business Planning

Impact of GDP

Business Planning

Changes in Currency Values

Government Policies

Interest Rate Changes

THANK
YOU