GDP Equations

GDP Equations - gross profit = gross sales – gross costs...

This preview shows pages 1–2. Sign up to view the full content.

GDP Equations National Income and Product Accounts: GDP = C + I + G + (X – M) GNP = GDP + NFIA NNP = GNP – CCA NI = NNP – SD PI = NI + Income received but not earned (dividends, government transfer payments, personal interest income) - Income earned but not received (corporate profits, social insurance contributions, net interest, indirect business taxes) DPI = PI – Personal taxes (NFIA = receipts of factor income from the rest of the world - payments of factor income to the rest of the world.) Ways of measuring GDP: 1. GDP as the value of final output: GDP = Σ (P i x Q i ) 2. GDP as expenditures: GDP = C + I + G + (X – M) 3. GDP as the sources of income: GDP = w + i + R + profit – NFIA +CCA + SD 4. GDP as the uses of income: GDP = C + S + T + M

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Measuring GDP as expenditures is equivalent to measuring GDP as the sources of income: For any firm, profit = sales – costs For all firms producing final goods and services in the economy,
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: gross profit = gross sales – gross costs or gross sales = gross costs + gross profits so GDP as expenditures = resource costs + other costs + profit so C + I + G + (X – M) = w + i + R - NFIA + CCA + SD + profit so GDP as expenditures = GDP as the sources of income Measuring National Income using the income approach: GDP = w + i + R + profit – NFIA + CCA + SD Since GNP = GDP + NFIA then GNP = w + i + R + profit – NFIA + CCA + SD + NFIA = w + i + R + profit + CCA + SD since NNP = GNP – CCA then NNP = w + i + R + profit + CCA + SD – CCA = w + i + R + profit + SD Since NI = NNP – SD then NI = w + i + R + profit + SD – SD = w + i + R + profit National income is equal to the sum of factor payments in the economy, National income = wages + interest + rents + profits...
View Full Document

{[ snackBarMessage ]}

Page1 / 2

GDP Equations - gross profit = gross sales – gross costs...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online