Gross Domestic Product

Lecture Notes on Measuring the Economy
By: Melcah T. Pascua

National Income Accounting

The primary measure of the economy’s performance is its annual total output of goods and services or, as it is called, its aggregate output. Aggregate output is labeled Gross Domestic Product (GDP): the total market value of all final goods and services produced in a given year.

Three approaches of computing GDP.

1. The Expenditure Approach (Output Approach)

Personal Consumption Expenditure (C)……………… xxxxx
Gross Private Domestic Investment (Ig)………….……. xxxxx
Government Spending (G)………………………….……… xxxxx
Net Exports (Xn)………………………………………….…..…. xxxxx

Gross Domestic Product ………………………………… xxxxxxx

(C + Ig + G + Xn)

2. The Income Approach (Allocation or Earnings Approach)

Compensation of Employees…………………….…………. xxxxx
Rents………………………………………………….……………….. xxxxx
Interest……………………………………………..………………… xxxxx
Proprietor’s Income…………………………..………………… xxxxx
Corporate Profits………………………………………………. xxxxx Corporate Income Taxes…………… . xxxxx Dividends………………………………….. xxxxx Undistributed Corporate Profits…. xxxxx

National Income………………………………………………….. xxxxx

Indirect Business Taxes……………………….……………….. xxxxx
Consumption of Fixed Capital………………………………. xxxxx
Net Foreign Factor Income Earned in home country……………….…………. xxxxx

Gross Domestic Product …………………………………. xxxxx

3. The Industry-Origin Approach (Value-Added Approach)

Agriculture, hunting, forestry, and fishing…….…….. xxxx
Agriculture and forestry……………………. ………….xxxx
Fishing……………………………………………………..…… xxxx

Industry………………………………………….….…………….. xxxx Mining and quarrying…………………………………. xxxx
Manufacturing……………………….……………………. xxxx
Construction…………………………….…………………. xxxx
Electricity, gas, and water………………….……….. xxxx

Service sector……………………………………..………………. xxxx
Transport, storage …………………….………………. xxxx
Trade and repair of motor vehicles, motorcycles, personal and household goods