Unit Two: Chapter 19- GDP (Part Two)

GDP

Notes from (1/29/16)

Two Ways to Calculate GDP

1. Expenditure Approach
2. Income Approach

Expenditure Approach- Add up all the spending on final goods and services produced in a given year 

C + Ig + G + Xn

Income Approach- Add up all of the income that resulted from selling all final goods and services produced in a given year

     -Rarely used because people lie about their income

W (wages) + R (rent) + i (interest) + P (profits) + Statistical Adjustments

VOCABULARY

Compensation of Employees- Includes the wages, salaries, fringe benefits, Social Security contributions, and health and pension plans

Rent- The income of the property owner

Interest- The income from investments

Corporate Profits- The income of the corporation stockholders

Proprietor's Income- Income of entrepreneurship's or partners

Need to Know Formulas

Budget = Government Purchases of Goods and Services + Government Transfer Payments - Government Tax and Fee Collection

     -  + means Deficit, - means Surplus

Trade = Exports - Imports

     - + means Surplus, - means Deficit

National Income- Two Formulas!

1. Compensation of Employees + Rental Income (Rent) + Interest Income (Interest) + Corporate Profits + Proprietor's Income
2. GDP - Indirect Business Taxes - Depreciation- Net Foreign Factor Payments

Disposable Personal Income = National Income - Personal Household Taxes + Government Transfer Payments

GNP = GDP + Net Foreign Factor Payments

Net Domestic Product = GDP - Depreciation

Net National Product = GNP - Depreciation 


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