Calculating GDP

1a. Income Approach- adding all the income that resulted from selling FINAL goods and services produced in a year.
 ( wages + rent + interest + profit +statistical adjustment)
1b. Expenditure Approach- adding all the spending on final goods and services produced in a given year.
(GDP = C (Personal Consumption) + Ig (Investments) + G (Government Spending) + Xn (Net Exports)
2a.
Compensation of Employees- wage + salaries or wage salary supplements such as welfare
Rent-income received by the households and businesses that supply resources
Interest- money paid to suppliers of loans
Proprietor's Income- comes from sole proprietorship and partnerships
Corporate Profits- could include dividends, corporate income taxes and undistributed corporate profits.
Statistical Adjustment- indirect business tax, consumption of fixed capital (depreciation) and net factor foreign payment.
3.Nominal v Real
Nominal GDP- quantity x current year price
Real GDP- quantity x base year price
-In the base year Nominal GDP = Real GDP, in years after the base year Nominal GDP > Real GDP. In years before base year Nominal GDP < Real GDP.
4. GDP Deflator
)Nominal GDP/Real GDP x100) - In years before the base year, deflator less than 100, in base year it equals 100 and in years after it's greater than 100.
5. Consumer Price Index
(cost of market basket of goods in a given year/ cost of market basket of goods in base year x 100)
6. Inflation
(Price Index In Current Year- Price Index In Year 1/ Price Index In Year 1 x 100)