Gdp Types Formula

1. PRESENTATION
BY NAJMI HASSAN

2. TABLE OF CONTENTS
GDP
01.
TYPES
02.
FORMULA
03.

3. GDP (Gross Domestic Product):
The total monetary value of all the finished goods and services
produced inside the country’s borders in a specific time period is
called Gross Domestic Product (GDP).
It’s like a price tag on country’s output. It measures the size of
economy.

4. Types of Gross Domestic Product:
 Nominal GDP
 Real GDP

5. Nominal GDP (Gross Domestic
Product):
Nominal GDP is an assessment of
economic production in an economy that
consists of current prices in its calculation.
Nominal GDP is used when comparing
different quarters of output within the same
year.
Its GDP without adjustment for inflation.

6. Real GDP (Gross Domestic Product):
Real GDP is an inflation adjusted measure that
reflects the value of all goods and services produced
by an economy in a given year (expressed in base
year prices) and is often referred to as constant price
GDP, inflation-corrected GDP, or constant dollar
GDP.

7. GDP Formula:
GDP is calculated using following approaches:
1. Expenditure Approach
2. Income Approach

8. The Expenditure Approach:
The expenditure approach calculates the spending by the different
groups that are included in the economy. This approach can be
calculated using the following formula:
𝐺𝐷𝑃 = 𝐶 + 𝐺 + 𝐼 + 𝑁𝑋
Where,
C = consumption;
G = government spending;
I = investment; and
NX = net exports

9. Consumption:
Consumption refers to private consumer spending. Consumer
spends money to acquire goods and services, such as groceries
and haircuts etc.
Government Spending:
Government spending represents government consumption
expenditure. Government spend money on equipment,
infrastructure and payroll.

10. Investment:
Investment means private domestic investment or capital
expenditure. Businesses spend money to invest their business
activities. For example, business buying a machinery. It is a
critical component of GDP since it boosts employment levels.
Net Exports:
Net exports means the total exports subtracted from total imports.
All expenditures by companies located in a given country, even if
they are foreign companies, are included in this calculation.

11. Income Approach:
It calculate all the income earned by all factors of
production in an economy, including the wages
paid to labor, the rent earned by land, the return on
capital in the form of interest, and corporate
profits.
𝐺𝐷𝑃 =
𝑁𝑒𝑡 𝑂𝑝𝑒𝑟𝑎𝑟𝑖𝑛𝑔 𝐼𝑛𝑐𝑜𝑚𝑒
𝐶𝑎𝑝𝑖𝑡𝑎𝑙𝑖𝑧𝑎𝑡𝑖𝑜𝑛 𝑅𝑎𝑡𝑒

12. GDP price deflator:
GDP deflator adjust GDP by removing the effect of rising prices. It
shows how much of economy’s GDP is really growing. It measures the
changes in prices for all the services and goods produced. Following is
formula for GDP price deflator:
𝐺𝐷𝑃 𝑝𝑟𝑖𝑐𝑒 𝑑𝑒𝑓𝑙𝑎𝑡𝑜𝑟 =
𝑁𝑜𝑚𝑖𝑛𝑎𝑙 𝐺𝐷𝑃
𝑅𝑒𝑎𝑙 𝐺𝐷𝑃
× 100

13. THANK YOU

18. The consumer price
index measure the
average change of
time and prices the
consumer pay for a
fixed basket of
goods and services
The gdp price deflator is not
based on a fixed basket so it
reflect changes in consumption
or the addition of new goods or
services