meaSURES OF NATIONAL INCOM3E

1. INTRODUCTION
TO
Gross Domestic Product
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KAMRAN

2. Definition :-
The total market value of all final goods and services
produced during a given time period within a nation’s
domestic borders.
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3. Components Of GDP
GDP = Consumption (C) + Investment (I) +
Government Spending +(Exports -Imports) or
NET EXPORTS
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4. GDP vs GNP
• GDP factors of production located within a country
• GNP factors of production owned by a country’s citizens, regardless of
where the output is produced.
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5. The circular flow diagram illustrates the equality of income, expenditure,
and the value of production
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6. Changes in Nominal GDP
 GDP of a country can change due to fluctuations in price and demand/
The result may influence a country's progress. If GDP changes due to an
increase in the level of production and not prices, then productivity is
said to increase. However, if GDP increases due to an increase in price
while production remains constant, then any increase is a result of
inflation, not productivity. Such a change would not be reflected in real
GDP. Alternatively, nominal GDP may change due to a combination of
price and production change.
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7. Limits of GDP as a Measure
GDP does not cover all aspects of production in an economy, and may also
cover up some factors that may lead to long-term degradation. Production
not included in GDP include household production, which is the cooking,
cleaning and maintenance of homes. Although people tend not to get paid
for such tasks, many economists argue that it is still an occupation that is
not only a necessity but also requires substantial effort. GDP also does not
cover aspects such as the environment, personal satisfaction, happiness and
health quality. Many wealthy countries rank quite low in terms of personal
happiness.
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8. Features
•It can be treated as a characteristic of any country's development rate .
•It also judges the import export (International Trade) of a country
•It is a criteria for judging a country is under-developed, developing, or
developed.
•In most of the economies like that of India it is considered as an average
income.
•It helps in judging the Quality of human resource of the country.
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9. METHODS OF CALCULATING GDP
Economic activity at factor cost
Expenditure at market prices
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10. Definition of Nominal GDP
Nominal Gross Domestic Product is defined as a GDP measure,
expressed in absolute terms. The raw GDP data, before inflation is
called Nominal GDP. It is the aggregate monetary value of the
economic output produced during a particular financial year, within
the nation’s border. It represents the GDP at prevailing prices in
the market, i.e. the current market price.
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11. Definition of Real GDP
 Real Gross Domestic Product refers to the measure of GDP adjusted
according to the general price level, in a particular financial year. It
represents the economic worth of goods and services produced, after
considering inflation or deflation.
 While calculating real GDP measurement is done at fixed prices, i.e. at
the prices which are prevalent at some point of time in the past, known as
base year price or reference price. It reflects the economic output at
constant prices. Real GDP is considered as a true indicator of country’s
economic growth because it exclusively considers the production and free
from price changes or currency fluctuations
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12. BASIS FOR
COMPARISON
NOMINAL GDP REAL GDP
Meaning The aggregate market value of
the economic output produced in
a year within the boundaries of
the country is known as Nominal
GDP.
Real GDP refers to the value of
economic output produced in a
given period, adjusted according
to the changes in the general
price level.
What is it? GDP without the effect of
inflation.
Inflation adjusted GDP
Expressed in Current year prices Base year prices or constant
prices.
Value Higher Generally, lower.
Uses Comparison of various quarters
of the given year can be made.
Comparison of two or more
financial year can be done
easily.
Economic Growth Cannot be analyzed easily. Good indicator of economic
growth.
Comparison Chart
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13. The Gross Domestic Product (GDP) in India was worth 2597.49 billion US dollars in 2017. The
GDP value of India represents 4.19 percent of the world economy. GDP in India averaged 545.81
USD Billion from 1960 until 2017, reaching an all time high of 2597.49 USD Billion in 2017 and a
record low of 36.54 USD Billion in 1960.
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14. THANK YOU
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