Answer to Question #215877 in Macroeconomics for Melissa

Question

(a)What is the definition of the GDP?
(b)What items are not included in the calculation of GDP?
(c)How is it calculated using the expenditure approach?
(d)How is it calculated using the income approach?

Answer 1

a.

 GDP is the total economic or market value of all the finished goods and services produced within a nation's borders in an explicit time period. The GDP measures the value of economic activity within a country.

b.

The number of items that are not included when calculating the GDP include;

- Sales of goods that were that were imported.

- Sales of used goods

- Illicit sales of goods and services

-Transfer payments made by the government

-Intermediate goods that are used to produce other final goods.

c.

The expenditure approach to calculating GDP takes into consideration the sum of all final goods and services bought in an economy over a fixed period of time. It includes all consumer spending, government spending, business investment spending, and net exports.

The expenditure approach say GDP = consumption + investment +government expenditure +exports – imports

d.

As per the income approach, Gross Domestic Products can be computed as the sum of the total national income (TNI), sales taxes (T), depreciation (D), and net foreign factor income (F). Total national income is the sum of all salaries and wages, rent, interest, and profits.