GROSS DOMESTIC

PRODUCT

Presented by :-
Situn Mohanty
Nitu Singh
B.Jayati Gupta
Contents
 National Income
 Standard measures of national income
 GDP
 Needs to measure national income
 Methods OF GDP calculation
 Controversies
 Alternatives to GDP
 Measurements
 References
National Income
National income measures the money
value of the flow of output of goods and
services produced within an economy over
a period of time.
 Standard measures of income
and output
 Gross National Product(GNP)
 Gross Domestic Product(GDP)
 Net National Product(NNP)
 Net Domestic Product(NDP)
 Net National Income(NNI)
 Per Capita Income(PI)
 Personal Disposable Income(PDI)
GDP
GDP is the market value of all final goods
and services made within the borders of a
country in a year.It is a measure of country’s
overall economic output.
Need for the study of national income

 Size of the economy

 Trend or speed of the economic growth
 Structure and composition of national
income
 Future Development
 Plans and policies
 Forecasting
 International comparision
Methods

Product Method

Income Method

Expenditure Method
Product Method

This measure of GDP is calculated by adding

total value of output (goods and services)
produced by all activities during any time
period, say a year.
Precautions :-

 Items to be included:-
Imputed rent of owner occupied houses.
Imputed value goods and services.

 Items to be excluded:-
Sales and purchases of second goods.
Sale of bonds by a company.
Income of a smuggler.
Income Method
According to this method, national income is
calculated by summing up of factor incomes
of all the normal residents of a country
earned within and outside the country during
a period of account.
GDP = COE + GOS + GMI + TP & M - SP & M

COE = Compensation of employees

GOS = Gross operating surplus
GMI = Gross mixed income
GDP = R + I + P + SA + W
R = Rent
I = Interests
P = Profits
SA = Statistical Adjustments
W = Wages
Precautions :-
 Items to be included:-
Factor incomes.
Direct Taxes and corporate tax.
Imputed rent of owner occupied dwellings.

 Items to be excluded:-
Transfer income.
Second hand goods.
Illegal activities.
Wealth tax and gift tax.
Expenditure Method

The expenditure approach works on the

principle that all the products must be bought
by somebody, therefore the value of the total
product must be equal to people's total
expenditures in buying things.
GDP = C+I+G+(X-M)

C = Private Consumption Expenditure

I = Investment Expenditure
G = Govt. purchases of goods and services
X-M = Net exports
Precautions :-

 Intermediate goods and services

 Transfer payment
 Purchase of second hand goods
 Purchase of old shares/bonds or new
shares/bonds
Terms related to GDP
 Nominal GDP
 Real GDP
 GDP deflator
100 * Nominal GDP
Real GDP
Controversies

 Black economy
 Non-monetary economy
 Sustainability of growth
 Net change
 Economic Surplus
 GDP deflator
 Inequality of accounts
Alternatives to GDP

 Human Development Index(HDI)

 Genuine Progress Indicator (GPI)
 Gross National Happiness (GNH)
 Happy Planet Index(HPI)
 Gini coefficient
Measurements

 International Standard Measures

 National Standard Measures
References

 www.investopedia.com
 www.wikipedia.com
 www.indiainbusiness.nic.in
 www.financeexpress.com