# Different Ways To Calculate GDP Of A Country

The gross domestic product (GDP) of a nation is an estimate of the total value of all the goods and services it produced during a specific period, usually a quarter or a year. Its greatest use is as a point of comparison: Did the nation’s economy grow or contract compared to the previous period measured?

There are three different methods (Expenditure, Income and Production) which can be used to measure the GDP of a country. All of these methods in theory should sum to the same amount.

## 1. Expenditure method

The expenditure approach is where you add up all the various types of spending which occurs within an economy. There are 4 different types.

### Consumption (C)

Consumption is all the spending that households do on goods and services. For example, the number of apples a household purchases; the amount of money spent on healthcare; the amount of money spent purchasing new cars and the money spent on pizza are all examples of consumption spending.

### Net Exports (NX)

Net exports is defined at the purchases of domestically produced goods by foreigners subtracted from the purchases of internationally produced goods by local residents. In essence, it is the value of what is sent overseas minus the value of stuff that comes here.

If an airline company operating in the USA purchases a new plane from France, this would be considered an import for the USA and an export for France. This would cause the net exports to decrease for the USA whilst causing the net exports to increase for France.

An interesting case is where a foreign student from China comes and studies at a school in the USA. This is considered an export from the USA to China since the USA is producing a service (education) which is essentially being “sent” to a Chinese student who is from the Chinese economy. Thus, China is importing education from the USA.

Therefore, if we add up these 4 components we get:

GDP = C + I + G +NX

This is also called the demand approach to calculating GDP since all these components are demands for goods and services. It is looking at the demand side of the economy.

For example, using the input-output tables for Australia you can calculate the GDP for Australia in the year 2018 with:

C=\$969,173C=\$969,173
I=\$418,703I=\$418,703
G=\$309,325G=\$309,325
X=\$308,306X=\$308,306
M=\$357,121M=\$357,121

Giving GDP=\$969,173+\$418,703+\$309,325+\$308,306−\$357,121GDP=\$969,173+\$418,703+\$309,325+\$308,306−\$357,121

GDP=\$1,659,604GDP=\$1,659,604

where GDP is measured in millions of dollars.

## 2. Income Method :

The income approach starts with the income earned from the production of goods and services. Under the income approach, we calculate the income earned by all the factors of production in an economy.

Factors of production are the inputs which go into producing final product or service. Thus, the factors of production for business are – Land, Labour, Capital and Management within the domestic boundaries of a country.

In this approach, we calculate income from each of these Factor of production which includes the wages got by labour, the rent earned by land, the return on capital in the form of interest, as well as business profits earned by management. Sum of All these incomes constitutes national income and is a way to calculate GDP.

Formula : Net National Income = Wages + Rent + Interest + Profits

To make it gross, we need to do two adjustments – Add depreciation of capital & Add Net Foreign Factor Income. NFFI is (income earned by the rest of the world in the country – income earned by the country from the rest of the world)

GDP (Factor Cost) = Wages + Rent + Interest + Profits+ Depreciation + Net Foreign Factor Income

This basically is the sum of final income of all factors of production contributing to a business in a country before tax.

Now if we add taxes and deduct subsidies, then it becomes GDP at Market cost.

GDP (Market Cost) = GDP (Factor Cost)+ (Indirect Taxes – Subsidies)

## 3. Production Method:

The production method (or value-added) is where we calculate the total value of all goods produced in the economy minus the value of intermediate goods.

Consider an economy which produces steel and cars. Suppose the economy produces 100 units of steel which it sells for \$1 and it produces 10 cars, using 5 units of steel, which it sells for \$100.

As the production of steel requires no intermediate inputs, the value added from the production of steel is \$100.

The production of cars produces \$1000 worth of cars using \$50 of steel. Therefore, the value added is \$950.

The total value-added/GDP of the economy is thus \$1050. Alternatively, we could have added the total amount spent on the cars \$1000 and total spend on steel \$100 giving \$1100 and then subtracted the \$50 of intermediate inputs to also get \$1050.

Every reader contribution, however big or small, is so valuable for our future. Support pyoflife.com from as little as \$1 – and it only takes a minute. Thank you.

### 90 thoughts on “Different Ways To Calculate GDP Of A Country”

1. View the profiles of people named Ivana Pilic. Join Facebook to connect with Ivana Pilic
and others you may know. Facebook gives people the power to.

2. Simply wish to say your article is as astonishing. The clearness in your post is simply excellent and i can assume you are an expert on this subject. Well with your permission allow me to grab your RSS feed to keep up to date with forthcoming post. Thanks a million and please continue the gratifying work.

3. Hi there, I found your web site by the use of Google even as searching for a similar topic, your web site got here up, it seems good. I have bookmarked it in my google bookmarks.

5. Thanks for a marvelous posting! I seriously enjoyed reading it, you could be a great author.I will be sure to bookmark your blog and definitely will come back sometime soon. I want to encourage yourself to continue your great writing, have a nice holiday weekend!

6. Excellent article. I certainly love this website. Continue the good work!

7. This article will help the internet people for creating new blog or even a blog from start to end.

8. Awesome! Its actually remarkable piece of writing, I have got much clear idea concerning from this piece of writing.

9. I simply could not leave your site prior to suggesting that I really enjoyed the standard information a person supply for your visitors? Is going to be back regularly in order to check up on new posts

10. This piece of writing will help the internet people for creating new website or even a blog from start to end.

11. If you want to get much from this article then you have to apply such strategies to your won weblog.

12. It’s going to be end of mine day, but before end I am reading this wonderful piece of writing to increase my experience.

13. Write more, thats all I have to say. Literally, it seems as though you relied on the video to make your point. You definitely know what youre talking about, why waste your intelligence on just posting videos to your site when you could be giving us something enlightening to read?

14. Heya i’m for the primary time here. I came across this board and I find It truly useful & it helped me out a lot. I am hoping to offer something back and help others like you helped me.

15. We are a group of volunteers and starting a new scheme in our community. Your site provided us with useful information to work on. You have performed an impressive process and our whole group shall be grateful to you.

16. I have been surfing online more than three hours these days, yet I never found any interesting article like yours. It’s lovely value enough for me. Personally, if all webmasters and bloggers made good content as you did, the internet will probably be much more useful than ever before.

17. Thank you for the auspicious writeup. It in fact was a amusement account it. Look advanced to far added agreeable from you! By the way, how can we communicate?

18. It was great to read your blog, I got to learn a lot.

19. Hi there everyone, it’s my first visit at this web site, and post is in fact fruitful designed for me, keep up posting such articles or reviews.

20. When I originally commented I seem to have clicked the -Notify me when new comments are added- checkbox and now each time a comment is added I recieve four emails with the same comment. Is there a way you can remove me from that service? Cheers!

21. Having read this I thought it was very informative. I appreciate you finding the time and effort to put this short article together. I once again find myself spending a significant amount of time both reading and leaving comments. But so what, it was still worth it!

22. Aw, this was an extremely nice post. Taking the time and actual effort to produce a good article but what can I say I procrastinate a lot and never seem to get anything done.

23. What’s up to all, because I am actually keen of reading this weblog’s post to be updated regularly. It includes good data.

24. I couldn’t resist commenting. Perfectly written!

25. Article writing is also a fun, if you know then you can write or else it is complex to write.

26. Great goods from you, man. I’ve understand your stuff previous to and you’re just too fantastic. I really like what you’ve acquired here, really like what you’re stating and the way in which you say it. You make it entertaining and you still take care of to keep it smart. I cant wait to read far more from you. This is actually a terrific website.

27. Wonderful goods from you, man. I’ve be mindful your stuff prior to and you’re simply too fantastic. I really like what you’ve acquired here, really like what you’re stating and the way by which you are saying it. You are making it entertaining and you still take care of to stay it sensible. I cant wait to read far more from you. This is actually a wonderful website.

28. Have you ever thought about publishing an e-book or guest authoring on other sites? I have a blog based upon on the same subjects you discuss and would really like to have you share some stories/information. I know my subscribers would enjoy your work. If you are even remotely interested, feel free to send me an e-mail.

29. Hey there, I think your website might be having browser compatibility issues. When I look at your blog in Safari, it looks fine but when opening in Internet Explorer, it has some overlapping. I just wanted to give you a quick heads up! Other then that, very good blog!

30. Howdy! Quick question that’s entirely off topic. Do you know how to make your site mobile friendly? My web site looks weird when viewing from my iphone 4. I’m trying to find a theme or plugin that might be able to correct this problem. If you have any suggestions, please share. Thank you!

31. Greetings I am so happy I found your weblog, I really found you by error, while I was browsing on Google for something else, Anyhow I am here now and would just like to say kudos for a fantastic post and a all round interesting blog (I also love the theme/design), I dont have time to look over it all at the minute but I have saved it and also added in your RSS feeds, so when I have time I will be back to read a great deal more, Please do keep up the fantastic b.

32. I’d like to find out more? I’d care to find out more details.

33. Элитный мужской эромассаж Москва – тайский салон

34. Fine way of describing, and good article to get information about my presentation subject matter, which i am going to convey in institution of higher education.

35. Excellent post. I used to be checking continuously this blog and I am inspired! Very useful information particularly the remaining part 🙂 I maintain such info a lot. I used to be seeking this particular info for a long timelong time. Thank you and good luck.

36. Howdy are using WordPress for your blog platform? I’m new to the blog world but I’m trying to get started and create my own. Do you need any coding knowledge to make your own blog? Any help would be greatly appreciated!

37. Hi, i think that i saw you visited my blog so i got here to go back the prefer?.I am trying to find things to improve my site!I assume its good enough to use some of your concepts!!

38. Thank you for another informative web site. Where else may I am getting that kind of info written in such a perfect approach? I have a challenge that I am simply now operating on, and I have been at the glance out for such information.

39. I want to to thank you for this great read!! I certainly enjoyed every little bit of it. I have you bookmarked to check out new stuff you post

40. I will right away seize your rss as I can not find your email subscription link or newsletter service. Do you have any? Please allow me realize so that I may just subscribe. Thanks.

41. Hi! Someone in my Myspace group shared this site with us so I came to take a look. I’m definitely enjoying the information. I’m book-marking and will be tweeting this to my followers! Fantastic blog and wonderful style and design.

42. Hey there, I think your website might be having browser compatibility issues. When I look at your blog in Safari, it looks fine but when opening in Internet Explorer, it has some overlapping. I just wanted to give you a quick heads up! Other then that, awesome blog!

43. Since the admin of this website is working, no doubt very soon it will be famous, due to its quality contents.

44. I love your blog.. very nice colors & theme.
Did you design this website yourself or did you hire someone to do it
for you? Plz respond as I’m looking to construct my own blog
and would like to find out where u got this from.
appreciate it

45. Hello, I wish for to subscribe for this blog to get hottest updates, so where can i do it please help out.

46. When someone writes an article he/she keeps the thought of a user in his/her mind that how a user can know it. Thus that’s why this piece of writing is great. Thanks!

47. Hey There. I found your blog using msn. This is a very well written article. I will be sure to bookmark it and come back to read more of your useful information. Thanks for the post. I will definitely comeback.

48. This post will help the internet people for building up new weblog or even a blog from start to end.

49. Hi, just wanted to say, I enjoyed this article. It was funny. Keep on posting!

50. I blog frequently and I genuinely appreciate your content. This great article has really peaked my interest. I will bookmark your site and keep checking for new information about once a week. I subscribed to your RSS feed as well.

51. Whoa! This blog looks exactly like my old one! It’s on a entirely different topic but it has pretty much the same layout and design. Great choice of colors!

52. It’s actually a great and helpful piece of information. I’m happy
us informed like this. Thanks for sharing.

53. Heya i’m for the first time here. I came across this board and I find It truly useful & it helped me out a lot. I hope to give something back and help others like you helped me.

54. Everything is very open with a very clear description of the issues. It was truly informative. Your website is very useful. Thanks for sharing!

55. Hi! I just wanted to ask if you ever have any problems with hackers? My last blog (wordpress) was hacked and I ended up losing a few months of hard work due to no backup. Do you have any solutions to prevent hackers?