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Is the value of the GDP calculated by the income approach equal to the value of GDP calculated by the expenditure method?
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∙ 13y ago
YES
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∙ 10y agoanal warts
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What are the methods of calculating GDP?
expenditure approach and income approach & VALUE ADDED METHOD
How many methods of GDP are there?
the methods for GDP is of 3 types 1.product method 2.income method 3.expenditure method.
How is the GDP calculated using the expenditure method?
GDP Expenditure Compositions (or) Expenditure Method = C + Ig + G + Xn : Personal consumption expenditures (C) -4.3% Gross domestic investment (Ig) -23.0 Government purchases (G) +1.3 Net exports (Xn) -6.1 Real GDP -6.3
How do you calculate GNP by using income approach?
MY tercher told me ,that has 3 method to calculate. 1.income method -total all money earn by factors of production ( wage,rent ,interest,profit) 2.output method - total value of all output produced in the economy(value added for manufactured goods) 3.expenditure method (total of capital asserts) all money on goods and servise +adiction to stock+(import spending-export spending)+(subsidies-taxes)the earned income of workers added together then subtracted from investors profit.
How is GDP growth rate calculated?
There are different approaches taken in order to calculate the GDP:1. the expenditure method: GDP = Private Consumption + Gross investment + Government Spending + (Exports − Imports), orGDP = C + I + S + (X+I)2. production approach" Market value of all final goods and services calculated during 1 year . " The production approach is also called Net Product or Value added method. This method consists of three stages:Estimating the Gross Value of domestic Output out of the many various economic activities;Determining the intermediate consumption, i.e., the cost of material, supplies and services used to produce final goods or services; and finallyDeducting intermediate consumption from Gross Value to obtain the Net Value of Domestic Output.3. Income ApproachTotal income can be subdivided according to various schemes, leading to various formulae for GDP measured by the income approach. A common one is:GDP = Compensation of Employees+ Gross operating surplus + Gross Mixed income + taxes less subsidies on production and imports GDP = COE + GOS + GMI + TP & M - SP & M
What are the methods of calculating GDP?
expenditure approach and income approach & VALUE ADDED METHOD
What formula do you use to calculate national income?
The Product MethodThe Income Method or theThe Expenditure Method
How many methods of GDP are there?
the methods for GDP is of 3 types 1.product method 2.income method 3.expenditure method.
Is it possible to have a negative net income and positive cash flow?
Yes and No. If the method of accounting followed is Mercantile, Yes. If the method of accounting followed is Cash System, No. In Mercantile method of Accounting, Negetive Income represents the excess of expenditure over income. In this method; Income and Expenditure considered are on accrual basis, i.e., income or expenditure is taken as such in the books of account; the moment a right to receive income or a liability to pay for expenditure has crytallised. The movement fo cash into the business or out of business is not the criteria. Therefore, inspite of a negative income in a particular year, a business may have a positive Cash flow on account of excess of cash flow arising out of previous years income, which is held as an asset in the form of Sundry Debtors, over the payments made in respect of previous years expenditure which is held as a liability in the form of Sundry Creditors on the balance sheet.
Gross Domestic Product is calculated by summing up?
Gross domestic product or GDP generally is defined as the market value of the goods and services produced by a country and is calculated per quarter. One method of calculating is summing up all expenditures in the country and is known as the expenditure approach.
How is the GDP calculated using the expenditure method?
GDP Expenditure Compositions (or) Expenditure Method = C + Ig + G + Xn : Personal consumption expenditures (C) -4.3% Gross domestic investment (Ig) -23.0 Government purchases (G) +1.3 Net exports (Xn) -6.1 Real GDP -6.3
How do you calculate GNP by using income approach?
MY tercher told me ,that has 3 method to calculate. 1.income method -total all money earn by factors of production ( wage,rent ,interest,profit) 2.output method - total value of all output produced in the economy(value added for manufactured goods) 3.expenditure method (total of capital asserts) all money on goods and servise +adiction to stock+(import spending-export spending)+(subsidies-taxes)the earned income of workers added together then subtracted from investors profit.
How is GDP growth rate calculated?
There are different approaches taken in order to calculate the GDP:1. the expenditure method: GDP = Private Consumption + Gross investment + Government Spending + (Exports − Imports), orGDP = C + I + S + (X+I)2. production approach" Market value of all final goods and services calculated during 1 year . " The production approach is also called Net Product or Value added method. This method consists of three stages:Estimating the Gross Value of domestic Output out of the many various economic activities;Determining the intermediate consumption, i.e., the cost of material, supplies and services used to produce final goods or services; and finallyDeducting intermediate consumption from Gross Value to obtain the Net Value of Domestic Output.3. Income ApproachTotal income can be subdivided according to various schemes, leading to various formulae for GDP measured by the income approach. A common one is:GDP = Compensation of Employees+ Gross operating surplus + Gross Mixed income + taxes less subsidies on production and imports GDP = COE + GOS + GMI + TP & M - SP & M
Uses of national income?
Uses of National Income Data:- 1:National Income as a measure of economic growth - Estimates of national income at constant prices indicate economic growth of a country. 2:National Income as an indicator of success or failure of planning - If a country has adopted planning as a means of economic growth then national income data can help in assessing the achievements of planning. 3: Useful in estimating per capita income - Per capita income is obtained by dividing national income by total population of the country. 4:Useful in assessing the performance of different production sectors - Production units of a country are broadly classified into primary, secondary and tertiary sectors. These sectors generate factor incomes. The data on factor incomes generated by these sectors can be used to measure their relative contributions to national income. 5:Useful in measuring inequalities in the distribution of income - All individuals so not have the same income. It means national income is unequally distributed among people. The extent of inequality in a country can be measured from the national income data collected through the income distribution methods. 6:Useful in measuring standards of income - The expenditure method reveals consumption expenditure and investment expenditure. If the total consumption expenditure is divided by the total investment expenditure we get per capita consumption expenditure which indicates the average standard of living of the people of the country. 7:Makes international comparisons possible - We can compare the economies of any two countries on the basis of their national income data.
What is National Income Accounting as a method of National income?
Following are the method of national income accounting :-Product MethodExpenditure MethodIncome Method
What is difference between approach and method?
An approach = dealing with something Method = a particular way of doing something:
What does the gross domestic product measure?
* Posted: Sun, May 18 2008. 11:00 PM IST Ask Mint | Expenditure and income methods: two other ways of measuring GDPWhat goes out of your pocket as expenditure for using the laundry service ultimately becomes the income of the person providing that serviceReal Simple | Shailaja & Manoj K SinghOur economy works much like the game of passing the parcel, a favourite party game of children in which a gift wrapped in covers passes through different hands to the tune of music. In our economy also, money passes from one hand to another just like a parcel to the tune of demand and supply. So, the next time you take out your wallet, just keep in mind that you are playing a game of penny. This game can continue only if one person passes his penny to the next person. What goes out of your pocket as expenditure for using the laundry service ultimately becomes the income of the person providing that service. In this manner, the game of penny leads to the growth of gross domestic product or GDP in our economy.Johnny: Last week, you had told me that in addition to the output method we can also measure GDP growth by using the income or expenditure methods. I hope you will now take our discussion further.Jinny: Output of goods and services that have value in terms of money results in income for the producer and expenditure for the consumer.So, instead of measuring the value of output, we can also measure GDP by measuring either the income or expenditure of people.The figures arrived at by any of the three methods must be the same. But in reality, the figures may vary due to counting errors and omissions.Johnny: Yes, Jinny, errors and omissions are bound to occur when you are counting the income and expenditure of all the people in the country. But tell me how these income and expenditure methods work. Its a game of penny-money passes from one hand to another, to the tune of demand and supplyJinny: Let's talk about the expenditure method first. For measuring total expenditure, we divide the final users of goods and services into four groups: households, firms, government and foreign consumers.The expenditure method works on the presumption that whatever goods and services a country is generating ultimately get consumed by these four groups. So if you add up their total expenditure on various goods and services, you can very well know the value of GDP. Households spend their money in private consumption on a variety of goods and services such as foods, clothes, car, toothpaste, haircuts, laundry service and many other things.Likewise, our government also spends money on a variety of goods and services. It makes hospitals, builds schools and dams, and does many other things. Similarly, firms spend their money in investments for purchasing new machines, factories, office buildings, things that increase their productive capacity.In addition, unsold goods in the inventory of firms are also treated as their expenditure. This ensures that unsold goods are not left uncounted in the expenditure method.Finally, we count the money spent by foreign consumers on the goods and services produced within our country. We do this by calculating the value of net exports (by subtracting the value of imports from the value of exports of goods and services).Once we have the final figures of all the items-private consumption, firms' investments, government spending and net exports-we can add them to arrive at the final value of GDP through the expenditure method.Johnny: How do we use the income method to calculate GDP?Jinny: For calculating GDP by the income method, we can broadly divide our economy into two groups: those who contribute their labour and those who contribute their capital. The cost of production of goods and services leads to income for both these two groups of people. A mechanic engaged in the production of cars earns his income in the form of a monthly salary.The shareholders of the car company earn money in the form of dividends. The lenders of the company take away interest and the owners of the land take away lease rent.One activity can generate income for so many different people. We have numerous incorporated and unincorporated firms, enterprises and individuals in our country that are engaged in the production of a variety of goods and services. If we add the income of all the firms and individuals, we arrive at the value of GDP at factor cost. This value of GDP at factor cost does not include the taxes and subsidies on final goods and services paid by the final consumer. It only shows the production cost of goods and services.So, this figure will not match with the figure of GDP calculated by us through the expenditure method, which takes into account the actual price paid by the consumer after taxes and subsidies.In order to remove this discrepancy, we add the value of taxes and subtract subsidies from the value of GDP at factor cost. This will give you the final figure of the value of GDP calculated through the income method. This should be equal to the value of GDP calculated through the expenditure method.If it does, then you have completed a feat that is as difficult as counting the number of hair on your head.Johnny: That's true, Jinny. The next time I go for a haircut, I will challenge my barber to take stock of the number of hair on my head.Shailaja and Manoj K. Singh have important day jobs with an important bank. But Jinny and Johnny have plenty of time for your suggestions and ideas for their weekly chat. You can write to both of them at realsimple@livemint.comMaking sense of GDPWhat: Measurement of GDP requires collection of data from a variety of sources.How: Expenditure method uses expenditure figures of consumers whereas income method uses income figures of producers for measuring GDP.Who: The task of measuring GDP is done by the Central Statistical Organization in our country.
