How Gross Domestic Product ( Gdp ) Is Calculated

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US020C438A Principle of Economics Hayley Hart Professor Steven Drinkwater Describe how Gross Domestic product (GDP) is calculated; discuss how good a measure GDP is of a country’s economic wellbeing. Gross Domestic Product (GDP) can be calculated in three ways, Income, expenditure and output methods. Mankiw and Taylor(2014) says that in the UK The Office of National Statistics produces a single measure of GDP to do this, three approaches are used (Income, Expenditure and Production) the equal amount of all three of these approaches are then balanced out to create an overall final figure. The expenditure approach is the most commonly used method, it is based on the value of total expenditure goods and services in a current year. it sums up the level of consumption of goods and services, gross, investment, government purchase and exports and imports. The basic formula for the expenditure approach is; Y = C + I + G + NX Mankiw and Taylor(2014) Consumption is the spending made by residential properties, Investment is spending on equipment or a service to use or sell, government purchases is the spending on goods and services by local, state and national governments, the spending on produced goods and services by local state and national governments and net exports are the spending on products or services from across the globe minus spending on foreign goods by domestic residents. GNP stands for Gross National Product and is another measure of income, it’s the total income
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