Gross domestic product. Ways to measure GDP. Gross domestic product (GDP) and how it is calculated Calculation of GDP Fraud Banking services

Brief theory

Gross domestic product (GDP) is the central indicator of the system of national accounts, it characterizes the value of final goods and services produced by residents of the country for a certain period. GDP is used to characterize the results of production, the level of economic development, the rate of economic growth, and so on. Since GDP is an indicator of the product produced, final goods and services produced, it does not include the value of intermediate goods and services used in the production process, i.e. intermediate consumption value.

GDP is calculated on a gross basis, i.e. before deducting the amount of consumed fixed capital from the product produced. The consumption of fixed capital in this case is interpreted as a decrease in the value of fixed capital over the period as a result of physical and obsolescence. A variation of the GDP indicator can be considered net domestic product. This figure can be obtained by subtracting the amount of consumed fixed capital from the gross domestic product.

GDP can be calculated in the following three ways:

1. as the sum of gross value added (production method);
2. as the sum of end use components (end use method);
3. as the sum of primary incomes (distributive method).

At production calculation GDP is calculated by summing the gross value added of all resident production units grouped by industry or sector. Gross value added is the difference between the value of goods produced and services rendered (output) and the value of goods and services fully consumed in the production process (intermediate consumption).

It is recommended that the market output of goods and services be valued at basic prices or, if this is not possible, at producer prices. Basic price - the price received by the producer for goods and services, excluding any taxes payable on products and including subsidies on products. Producer price - the price received by the producer for goods and services, including taxes payable on products and imports and excluding subsidies on products and imports.

GDP by production method:

BB - gross output

PP - intermediate consumption

NNP - net taxes on products and imports (taxes on products and imports minus subsidies on products and imports)

According to the end use method, GDP is defined as the sum of the following components: expenditure on final consumption of goods and services, gross capital formation, and the balance of exports and imports of goods and services.

Gross capital formation is the net acquisition (acquisition less disposal) by residents of goods and services produced and rendered in the current period, but not consumed in it. Gross capital formation includes gross fixed capital formation, changes in inventories and net acquisition of valuables.

GDP by end use method:

Theoretically, this value should coincide with the GDP calculated by the production method, i.e. by summing the gross value added of all sectors or branches of the economy, but in practice they make a correction for statistical discrepancy (SR):

When GDP is determined by the distribution method, it includes the following types of primary income paid by resident production units: wages of employees, net taxes on production and imports (taxes on production and imports minus subsidies on production and imports), gross profit and gross mixed income.

Taxes on production and imports include taxes on products and other taxes on production. Taxes on products have already been mentioned before.

GDP distribution method:

Problem solution example

The task

The following data are available for the year for Russia (in current prices), million rubles:

Determine GDP at market prices by the following methods: production, distribution, final use.

The solution of the problem

We calculate GDP by the production method, it will be equal to the sum of gross value added and net taxes on products:

Gross value added:

Net taxes on products:

Let's calculate the GDP using the distribution method - it will be equal to the sum of wages of workers, net taxes on production and imports, and the gross profit of the economy and gross mixed income.

Net taxes on production and imports:

Let's calculate GDP using the final use method - it will be equal to the sum of final consumption expenditures, gross fixed capital formation and changes in inventories, as well as the export-import balance. In addition, we take into account the statistical discrepancy

GDP at market prices amounted to 21597968 million rubles.

The price is strongly influenced by the urgency of the decision (from days to several hours). Online help in the exam / test is carried out by appointment.

The application can be left directly in the chat, having previously thrown off the condition of the tasks and informing you of the deadlines for solving it. The response time is several minutes.

Gross domestic product is a calculated indicator and represents the total market value of the final goods and services created in the territory of the country for a certain period of time (usually a year).

When calculating GDP, intermediate products, transfers, transactions with securities, second-hand goods are not taken into account. At the same time, the value of GDP includes an increase in inventories (unsold products created during the year, including all raw materials produced that were not processed).

There are three methods for calculating GDP:

1) by income: factor income of economic entities (salary, bonuses, profit, rent, interest) is summed up, as well as, in accordance with statistical reporting, depreciation and net indirect taxes on business (taxes minus subsidies);

2) by expenditures: expenditures of all economic entities, household consumer expenditures, investment expenditures of firms, government expenditures on the purchase of goods, services and investments, net exports (balance of exports and imports) are summed up;

3) by value added (production method): only the value added at each stage of the production of the final product is summed up.

Added value is an increase in value. It can be defined as the difference between the total revenue received by the firm from the sale of this product and the sum of the costs of acquiring raw materials, materials, fuel, energy, etc. from other firms (i.e., the cost of intermediate products).

Distinguish nominal GDP, calculated at current prices and real calculated in base year prices.

The ratio between nominal GDP and real GDP gives a composite measure of the price level, or deflator:

7. Aggregate demand

Aggregate demand(aggregate demand - AD) characterizes the desire and ability of households, firms, states and foreign countries to purchase a certain amount of goods and services at the prevailing price level.

AD includes the following elements:

a) household consumer spending (consumption demaund - C);

b) investment costs of firms (investment demaund - I);

c) demand from the state - public procurement of goods and services (gorerments pending - G);

d) the demand of foreign countries - net exports (netexport - NE).

The formula for aggregate demand is:

This formula reflects the expenditures that macroeconomic entities intend to make. At the same time, the higher the general level of prices, the less they intend to spend on the purchase of final goods and services.

Therefore, the dependency AD from the general price level is inverse and can be graphically represented as a curve with a negative slope.

Rice. 3. Aggregate demand curve AD

The y-axis plots the general price level ( R), and along the abscissa, real GDP, i.e., expressed in prices of the base year (Fig. 3).

In macroeconomics, economic entities are both buyers and sellers. Losing as buyers as prices rise, they win as sellers. Moreover, we are not talking about the price of an individual product, but about the general level of prices. Therefore, the negative slope of the curve cannot be explained. AD like in microeconomics. There, the change in the magnitude of demand for an individual product was explained by dependence on the price of it, a decrease in marginal utility, income and substitution effects.

Negative slope of the aggregate demand curve AD caused by other price factors. It:

1) "the interest rate effect". For example, when the price level rises, the demand for money increases, as the need for money for current transactions increases. With a constant money supply, banks, in order to attract insufficient cash, raise interest rates, which reduces the costs of economic agents associated with obtaining a loan, and therefore reduces the volume of aggregate demand;

2) "wealth effect". When the price level rises, the real purchasing power of financial assets (stocks, bonds, fixed-term accounts, etc.) falls. As a result, their owners become poorer and aggregate demand shrinks;

3) "the effect of imported goods". With an increase in the domestic price level, the demand for domestic goods decreases, and for cheaper imported goods, it increases, which leads to a decrease in aggregate demand.

Curve shift AD occurs as a result of changes in non-price factors:

1) changes in consumer spending, i.e., associated with changes in the level of well-being: income growth, changes in income tax, etc.;

2) changes in investment costs, i.e., in the volume of purchases of capital goods, associated with a change in the level of taxes on business, the level of use of production capacities;

3) changes in public spending caused mainly by political decisions;

4) changes in the cost of net exports, due to the level of income in the country, changes in the exchange rate;

5) changes in the world economy, since currency fluctuations, economic growth in other countries also affect aggregate demand.

1. Macroeconomic indicators

To analyze macroeconomics, a system of indicators is needed that gives a complete picture of economic life.

The concept of the System of National Accounts

The need for a system of macroeconomic indicators was recognized by the English economist William Petty, who was the first in the world to assess the national income of this country. The first macroeconomic model of the national economy was created by the Frenchman Francois Quesnay, the head of the physiocratic school. At the same time, the need for a system of macroeconomic indicators was especially strong in the 1920s and 1930s. 20th century In the USSR, a system of indicators and tables was created, called the balance of the national economy, which was already used in the preparation of the first five-year plan for the development of the national economy (1928-1932). In the West, the development of such a system began after the Great Depression 1929-1933. A number of important principles of the ϶ᴛᴏ system were formulated by A. Marshall, then by J.M. Keynes; Great contributions were made by the English economists R. Stone, C. Clark, J. Hicks and the American economists S. Kuznets, M. Gilbert, V. Leontiev, and others. The United Nations published a document called "System of National Accounts and Ancillary Tables", which can be considered as the first internationally recognized version of the system of macroeconomic indicators. By the way, this system was revised, and now the version of 1993 is in force. Since the end of the 80s. Russia also began to switch to it.

Essence and structure of the System of National Accounts

The System of National Accounts (SNA) is a system of interrelated indicators used to describe and analyze macroeconomic processes. It is worth noting that it provides information on all stages of the economic cycle - production and exchange, primary and secondary distribution (redistribution), consumption and savings (accumulation) The 1993 UN SNA includes an assessment of the shadow economy, which, as already noted, is a production ordinary goods and services carried out clandestinely in order to conceal income from taxation. Moreover, she proposes to take into account even the production of legally illegal goods and services (drugs, prostitution, etc.), as well as household work (cooking, cleaning homes, raising children, etc.), although most countries of the world, including Russia, are not ready to include estimates of ϶ᴛᴏ activity in ϲʙᴏ and calculations. Material published on http: // site

The structure of the System of National Accounts proceeds from the fact that each stage of the economic cycle ϲᴏᴏᴛʙᴇᴛϲᴛʙ has a special account or group of accounts. The Russian SNA currently includes the following accounts.

Goods and services account, like all other SNA accounts, consists of two parts. The “Resources” part shows the output and imports of products, and at the so-called basic prices (i.e. excluding indirect taxes, but taking into account subsidies received), as well as indirect taxes (in the SNA they are called taxes on products and imports) and subsidies on manufactured products and imports, which is essential for bringing basic prices to market prices. The “Use” part reflects the volumes of use of products for consumption, accumulation and export (Table 20.1)

Table 20.1. SNA of Russia: goods and services account in 1997, billion rubles

Production account similar to the goods and services account, but excludes imports. It is worth noting that it will be the basis for determining the gross domestic product by industry (Table 20.2)

Table 20.2. SNA of Russia: production account in 1997, billion rubles

Income generation account and the distribution of primary income account reflect the payment of income to economic agents - households, non-financial and financial enterprises, government agencies and non-profit organizations. Since these incomes cannot always be distinguished in statistics, in these accounts they allocate wages of employees, gross profit and gross mixed income, as well as taxes on production and imports (i.e. not only indirect, but also direct taxes, except taxes on profits and incomes) minus subsidies for ϶ᴛᴏ production and imports (Table 20.3) On the basis of these accounts, it is possible to build a gross domestic product by income, as well as national income.

Table 20.3. SNA of Russia: income generation account in 1997, billion rubles

Secondary distribution of income account takes into account the receipt of income from outside and their transfer abroad.

Disposable income account and adjusted disposable account income reflect the distribution of income received by the country for final consumption and savings. It is worth noting that they serve as the basis for calculating GDP by use (Table 20.4)

Table 20.4. SNA of Russia: disposable income use account in 1997, billion rubles

Capital account demonstrates the transformation of savings into fixed capital, working capital and treasure (acquisition of valuables), taking into account the inflow of capital from outside and its outflow (the so-called net lending). Thus, in 1998, 622 billion rubles. Russian savings were reduced by 72 billion rubles. as a result of the negative balance of inflow and outflow of capital. As a result of this, gross capital formation was estimated at 550 billion rubles, of which 481 billion rubles went to gross fixed capital formation, and 65 billion rubles to increase inventories. and for the net acquisition of valuables - 4 billion rubles. (see fig. 18.1)

Added value

Added value- ϶ᴛᴏ the value created in the production process at a given enterprise and covering its real contribution to the creation of the value of a particular product, i.e. wages, profits and depreciation.

Therefore, the cost of raw materials and materials consumed, which were purchased from suppliers and the enterprise did not participate in the creation of them, is not included in the value added of the product produced by this enterprise.

In other words, value added is ϶ᴛᴏ the gross output of an enterprise (or the market price of output) minus current material costs, but with deductions for depreciation included in it (since the fixed assets of an enterprise take part in creating a new value for manufactured products) In Soviet practice ϶ᴛᴏt indicator was called conditionally net production.

These values ​​of added value, when summing them up for all sectors and industries, give the final indicators of GDP, ϲʙᴏ free from recalculation. In the SNA, value added includes depreciation, wages, corporate and unincorporated profits, rents received by them, interest on loan capital, as well as so-called net taxes or net exports.

To net taxes on products and imports ᴏᴛʜᴏϲᴙt indirect taxes on these goods and services, to net exports - exports of goods and services minus their imports. Net taxes on production and imports are slightly different from them. When calculating the amounts of accounts and GDP itself, net taxes or net exports are often added as a separate line in order to make different accounts or GDP indicators calculated in different ways, since not all calculations take into account indirect taxes, subsidies and the balance of foreign trade in goods and services.

As already noted, different prices can be used in the SNA - consumer prices, i.e. market prices (including taxes on products and imports minus subsidies), as well as producer prices, called basic prices (they are less than market prices by the amount of indirect taxes). It is worth saying that in order to transfer one price to another, they are adjusted for indirect taxes and subsidies.

Finally, the SNA considers taxes on products and imports not only as an adjustment to prices, but also as the primary income of government agencies.

Main macroeconomic indicators

A number of statistical indicators are used in macroeconomic analysis.

The central indicator of the System of National Accounts will be gross domestic product(GDP) In the statistics of a number of foreign countries, an earlier macroeconomic indicator is also used - gross national product(GNP) Both these indicators are defined as the value of the entire volume of final production of goods and services in the economy for one year (quarter, month) It is worth noting that they are calculated in both current (current) and constant prices (of any base year) The difference between GNP and GDP is as follows:

Three methods can be used to calculate GDP:

by expenditure (end-use method);

by income (distributive method);

value added (production method).

The use of these methods gives the same result, because in the economy

total income is equal to the amount of total expenses, and the value added is equal to the value of the final product, while the value of the final product is nothing more than the sum of the costs of end consumers for the purchase of the total product.

Gross domestic product, calculated by spending, is the sum of spending by all macroeconomic agents, which includes: household spending (personal consumption spending); firms' expenses (investment expenses); government spending (government purchases of goods and services); foreign sector spending (net export spending).

Personal consumption expenditures, C (consumption) is household spending on goods and services. In developed countries, they account for approximately 2/3 of total spending and are the main component of total spending. Consumer spending includes:

expenditure on current consumption - on the purchase of non-durable goods that serve less than one year (However, all clothing, regardless of the period of its actual use - 1 day or 5 years - refers to current consumption.);

expenses on durable goods that serve more than one year (furniture, household appliances, cars, etc.) (the exception is the cost of buying a home, which is not classified as consumer, but as investment expenses);

service costs.

Personal consumption spending = Household spending on current consumption + spending on durable goods (excluding household spending on housing) + spending on services

Investment costs, I is the cost to firms of buying investment goods. Investment goods are goods that increase the stock of capital. Investment costs include:

investments in fixed capital, which include the expenses of firms:

for the purchase of equipment

for industrial construction (industrial buildings and structures);

investment in housing construction, equal to the expenditure of households on the purchase of housing;

investment in inventory (inventory includes:

stocks of raw materials and materials necessary to ensure the continuity of the production process;

work in progress, which is associated with the technology of the production process;

stocks of finished (produced by the firm), but not yet sold products

In the system of national accounts, only expenditures on the purchase of investment goods are considered investments. Any other expenses that may generate income in the future (for example, the purchase of securities, antiques, works of art, etc.) are not considered investments.

When calculating GDP by expenditure, investment is understood as gross private domestic investment.

In accordance with the features of the functioning of fixed capital, investments are divided into gross, net and recovery. In the process of use, fixed capital wears out, is “consumed” and requires replacement, “recovery” of wear and tear. The part of the investment that goes to compensate for the depreciation of fixed capital is a recovery investment and is called the cost of capital consumption allowances or depreciation A.

Net private domestic investmentI net (net private domestic investment) represent additional investments that increase the size of the capital of firms. They are the basis for the expansion of production, growth in output.

Gross private domestic investmentI gross (grossprivate domesticinvestment) represent the total investment, the amount recovery and net investment:

I gross = A + I n

According to the form of ownership, investments are divided into private, i.e. investment by private firms, and public. In the system of national accounts, only private investments are included in investment expenditures, while public investments are included in government purchases of goods and services.

In addition, only domestic investments are recorded as investments in the system of national accounts, i.e. investments made in the economy of a given country.

Public procurement of goods and services,G include:

government consumption, which includes: expenses for the maintenance of state institutions and organizations that ensure the regulation of the economy, security and law and order, political administration, social and industrial infrastructure, and b) payment for services (salaries) of public sector employees;

public investment, i.e. investment spending by state enterprises. (Government spending by federal, regional and local governments on the final products of enterprises and on direct purchases of resources, especially labor by the state. However, this group of expenses excludes all state transfer payments).

A distinction should be made between the concept of “government spending” and the concept of “government spending”. The latter concept also includes transfer payments and interest payments on government bonds, which, as already noted, are not included in GDP, since they are neither a good nor a service and are not provided in exchange for goods and services.

net export,X n is the difference between export earnings ( Ex) and the country's import costs (Im) and corresponds to the trade balance:

Xn = Ex – Im.

The equation GDP on expenses = C + I gross + G + Xn–this is the basic macroeconomic identity.

The difference between the components of GDP - C, I g , G, X n - is based on the difference between the types of buyers who carry out these costs (households, firms, the state, foreigners), and not on the difference in the goods and services purchased. Thus, a car purchased by a household is included in component C if it is purchased by a firm - it is part of the investment in fixed assets, etc. The exception is investments in housing construction, which are included in GDP without dividing into components depending on who made these investments - households, businesses or the state.

In developed countries, the largest component in the structure of GDP is consumer spending (C) - from 50 to 78%; the most variable is investment costs (I g); G ranges from about 10 to 25%.

In Russia in 1999 the final consumption of households and non-profit organizations amounted to 54% of GDP, and in 2002. - 49.8%.

Gross private domestic investment is the most dynamic and volatile component of GDP, since the amount of investment is directly related to the presence of profitable areas of capital use. There are many of the latter during periods of prosperity of the economy and almost none in moments of crisis. During the years of the economic transformation crisis in Russia, the share of gross investment fell from 37% in 1991 to 15% in 1999. In 2002, the share of this indicator was 21.1%. The share of government purchases of goods and services and net exports in the Russian Federation in 1999 was 15% of GDP each, and in 2002 these figures were at the level of 16.9% and 10.8%, respectively.

Method of measuring GDP by income

With this method of calculating GDP, it is considered as the sum of incomes of owners of economic resources (households), i.e. as the sum of factor incomes, which include:

wages of workers and salaries of employees of private firms - income from the "labor" factor, which includes all forms of remuneration for labor: basic wages, bonuses, overtime pay, etc. The salaries of civil servants are not included in this indicator, as they are paid from the state budget and are part of public procurement, not factor income;

rent or rental payments - income from the "land" factor, including payments received by owners of real estate (land plots, residential and non-residential premises). If the landlord does not rent part of the premises, then the system of national accounts takes into account the income that he could receive if he rented these premises. These imputed incomes are called "imputed rents" and are included in the total amount of rent payments;

interest payments or interest on loan capital - income from the "capital" factor, which includes all payments that private firms make to households for the use of capital (including their bonds). Interest paid on government bonds is not included in this figure, as these payments are the result of redistribution and not the creation of national income;

Profit is income from the "entrepreneurial ability" factor. In the system of national accounts, in accordance with the differences in the organizational and legal forms of firms, there are:

profits of the unincorporated sector of the economy, including sole (individual) firms and partnerships based on own (possibly borrowed) capital; this type of profit is called "income of the owners of the unincorporated sector";

profit of the corporate sector of the economy based on joint-stock ownership; this type of profit is called "corporate profit" and is divided into three parts: corporate income tax; dividends that the corporation pays to shareholders and retained earnings of corporations, which serves as one of the internal sources of financing of net investment and is the basis for the expansion of the corporation's production.

In addition to factor income, GDP calculated by income takes into account:

Net indirect taxes on business (taxes minus subsidies). These taxes (value added tax, sales tax, excises, customs duties) are part of the price of a good or service. A feature of indirect taxes is that they are paid by the buyer of a product or service, and paid to the state by the company that produced them. Since GDP is a cost indicator, then, as in the price of any product, indirect taxes should be included in it;

depreciation (cost of capital consumed), which should be taken into account when calculating GDP, since it is also included in the price of any product;

net factor income from abroad, since not only national, but also foreign factors are used to create the GDP of a given country.

GDP by income = Salary + Rent +

Interest payments + Income of owners of the unincorporated sector + + Corporate profits + Net indirect taxes + Depreciation -

- Net factor income from abroad.

Method of calculating GDP by value added

With this method, the gross domestic product is determined by summing the value added for all sectors and types of production in the economy:

GDP = sum of value added

GDP, calculated as the sum of DC, reveals:

The ratio and role of individual industries in the created gross product: GDP (GNP) is taken as 100% and the share of individual industries is calculated. For example, the United States has a high share of the service sector in the creation of GNP (72%), but this does not mean that the level of industrial development of the country is lower;

Changes in the structure of the gross product and the dynamics of development of individual sectors of the national economy when comparing GDP (GNP) by production over a number of years;

The nature of the economic and especially structural policy pursued in the country;

Features of the structure of the country's economy by comparing this indicator and its structure with that of other countries.

GDP = ∑ DC of all producers of goods and services produced in the territory of a given country (residents) – ∑ DC of non-residents (less than a year living in the country).

The choice of one or another method of calculating GNP (GDP) is determined by the presence of a reliable information base: the production method and the end use method are most often used. Naturally, the GNP (GDP) calculated by any of the three methods are equal.

Macroeconomic theory uses another important indicator - potential GDP (Y *), which means the long-term production capabilities of the economy with the maximum use of available resources in conditions of stable prices. In other words, potential GDP is defined as the level of GDP corresponding to the full employment of all resources. This indicator is of particular importance in studying the problems of economic cycles, inflation, economic growth, when the reasons for the deviation of actual GDP from its potential level are analyzed.

At the same time, it should be noted that it is difficult to calculate potential GDP. Thus, due to the use of different initial values, such as the natural rate of unemployment (the rate of unemployment that does not raise the general price level or inflation) or the degree of capacity utilization, estimates of a country's potential GDP over a given period can vary widely.

Gross domestic product (GDP for short) is the main macroeconomic indicator. It is by him that they judge the development of the country, its impact on the world economy and investment attractiveness. Gross domestic product shows the size of the national economy, and its structure - the ratio of industries and their productivity. That is why it is so important to understand the methods of calculating GDP. We will consider the three main ones.

The term and its definition

Before we move on to what methods of calculating GDP exist, it is logical to dwell on what this indicator is. Gross domestic product is an aggregate measure of production equal to the sum of value added created by all residents and institutional units engaged in economic activity (plus taxes and minus subsidies). This definition is given by the Organization for Economic Cooperation and Development (OECD for short). It unites developed countries with representative democracy and a free market type of management. Initially, it was created as part of the Marshall Plan to coordinate various US projects for the post-war reconstruction of Europe.

General information

Methods for calculating GDP are usually used to assess the economic productivity of an entire country or a particular region. It can also be used to measure the relative contribution to the national economy of the industry in question. This is possible because the sum of all value added is GDP. The indicator calculation formula is not based on sales. It takes into account the difference between the cost of factors of production and finished products. For example, a firm buys steel and manufactures a car. If the methods for calculating GDP were based on market prices, double counting would occur. Since gross domestic product is the sum of value added, it also increases when a business reduces the consumption of materials and other inputs (called intermediate consumption) while continuing to produce the same output.

The most common use of GDP is to calculate the growth of an economy from year to year (and more recently quarterly). The Gross Domestic Product chart shows the successes and failures of the national government's course. Moreover, it can always be used to tell at what stage of the cycle the economy is: growth, peak, recession, depression.

Methods for determining

GDP can be determined in three ways. Each of them should give the same result. Allocate a production method for calculating GDP (value added), income and expenditure. The simplest is the first way. It follows logically from the definition. But its use is associated with data collection problems, which we will discuss later. The calculation of GDP by expenditure is based on the fact that all products produced must be bought by someone. This means that the amount of value added should be equal to the costs of the subjects. The calculation of GDP by income works on the principle that each factor contributes to the creation of finished goods. Net imports should also be taken into account. Therefore, GDP should be equal to the sum of the incomes of all producers.

By value added

The second name of this method is the production method for calculating GDP. This approach mirrors the OECD definition of the term. Since the sum of value added created by all residents and institutional units within a country is GDP, the calculation formula is as follows: the difference between the total value of output and intermediate consumption. To measure gross domestic product, all economic activity is classified into different sectors. After that, the performance of each of them is evaluated using one of the methods:

• Multiplying the output in each of the sectors by the market prices in it and adding the results.
• Collection of statistics on aggregate sales and stocks from the balance sheets of enterprises and their summation.

Subtracting intermediate consumption gives GDP at factor cost. In this case, each sector must be taken into account. Value added plus taxes and minus subsidies is GDP at producer prices.

Calculation of GDP by expenditure

In the economy, most things are produced for sale. Therefore, the amount of money spent on the purchase of goods and services can serve as an estimate of GDP. The formula in this case includes the following components:

• Consumption.
• Investment.
• Government spending.
• Export.
• Import.

GDP is equal to the sum of the first four components minus the last. An alternative formula includes final consumption expenditure, gross fixed capital formation and net exports.

Calculation of GDP by income

The number that is obtained using this method must be equal to the previous ones. However, in practice, statistical errors often occur, leading to minor differences. Income is divided into five categories:

• Salaries, additional labor money.
• corporate income.
• Interest and return on investment.
• Farmer's income.
• Profit from an unincorporated business.

GDP is equal to the sum of these five categories minus depreciation.

History reference

William Petty came up with the basic concept of GDP in order to protect landowners from dishonest taxation during the Anglo-Dutch Wars of 1652-1674. The method was developed by the mercantilist Charles Davenant. The modern concept of gross domestic product was first developed by Simon Kuznets to report to the US Congress in 1934. An American economist of Ukrainian origin and a Nobel laureate already then warned about the problems of using this indicator to measure well-being.

However, after the Bretton Woods Conference in 1944, GDP became the main means of evaluating the economies of states. At that time, the more common measure was the gross national product (abbreviated as GNP). Its main difference from GDP is that it measures the production not of enterprises and resident individuals, but of citizens and national firms, regardless of where they operate. The ubiquity of gross domestic product began in the 1980s. British economist Angus Maddison, a specialist in quantitative macroeconomic history, calculated the GDP of countries up to 1830.

Real and nominal indicators

Both market prices and basic prices can be used to calculate GDP. The nominal gross domestic product is the value of final goods and services produced in the territory of the state. As a result, it depends on inflation. Its presence leads to an inevitable increase in the indicator. Deflation, on the contrary, causes a decrease in GDP. The calculation of real GDP assumes that only real growth in production is taken into account. It can be expressed both in the prices of the previous year, and in any other year that you decide to take as a basis. The ratio of nominal and real GDP is called the deflator.

Data collection issues

The calculation of GDP indicators is carried out on the basis of statistical information for the country. If the added value created by firms is easy enough to take into account, then with the public sector, financial industries that deal with the production of intangible assets, everything is much more difficult. Nevertheless, it is the activity of these sectors that plays a significant role in the national economy of developed countries. International conventions that govern organizations and statistical offices must be constantly changed in order for the calculation of GDP to keep pace with the times. The gross domestic product indicator is the result of an analysis of extensive statistical data that is built into the conceptual framework of the measurement.

We recommend reading

Plumbing

Two tests showed two strips: the principle of the pregnancy test, instructions for use, result, ultrasound and gynecologist consultation What to do the test shows two strips

Furniture

When to register for pregnancy: specific dates and the need for registration

Furniture

What drops in a nose that. Types of nasal drops. Drops beetroot from the common cold

Vacation home

What is the reason for the constant desire to drink?

Wallpaper

Centralized library system of the Khaibullinsky district of the Republic of Bashkortostan Bianka Igor Kubersky

Finishing

Goat cheese cheese at home recipe with photo step by step