GDP and Economic Growth

How do you calculate GDP (Y) using the expenditure approach?

Y = C + I + G + X - M

How do you calculate household income?

Household income (Y) = C + S + T

How do you calculate national savings?

National Savings = S + (T - G)

What are the 7 income categories used in calculating GDP using the income approach?

(1) Compensation of employees (2) Net interest (3) Rental income (4) Corporate profits (5) Proprietors' income (6) Indirect taxes less subsidies (7) Depreciation

What is nominal GDP?

Just a more precise name for GDP when you want to be clear it's NOT real GDP.

What is real GDP?

The value of final goods and services produced in a given year when valued at constant prices.

How do you calculate real GDP using the Base-Year Prices method?

Choose a base year. Calculate GDP by multiplying quantities by price of that year. For the comparison year calculate real GDP by multiplying quantities by price of the base year

How do you calculate GDP deflator?

GDP deflator = (Nominal GDP ÷ Real GDP) x 100

How do you calculate the Price Index?

Price Index = ((total dollar expenditure on market basket in the specific year)/(total dollar expenditure on market basket in the base year)) x 100

How is the real GDP related to the Price Index?

Real GDP= (Nominal GDP/PI) x 100

How is Investment in GDP measured?

I = S + (T - G) + (M – X)

How do you measure foreign borrowing?

Foreign borrowing = (M – X)

Is the GDP deflator the same as the Price Index?

Yes