Calculating GDP

GDP Formulas

Expenditure Approach (Used to calculate goods/services)
 GDP = C + Ig + G + Xn

• C - consumption (personal). (Buying)
• Ig - gross private domesticated investment. (Inventory)
• G - government spending
• Xn - net export. (Exports - Imports).

Income Approach (Used to calculate factor of production)

 GDP = W + R + I +P + Statistical Adjustments

• W - wages (salaries/compensation)
• R - rents (rental income)
• I - interest (interest income)
• P - proprietor's income 
• Statistical Adjustments - add to match with the expenditure approach.

Budget

 Transfer payments + Government Purchase Goods & Services  - Government Tax & Fee Collection.

Deficit (+)                 · Surplus (-)

Trade
 Export - Import

Surplus (+)                ·Deficit (-)

National Income 
 NI = Compensation for Employees + Proprietor's Income + Rental Income + Interest Income + Corporation Profit
 NI = GDP - Indirect business tax - Depreciation - Net foreign factor payment. 

Disposable Income
 DPI = NI - Household Income + Government Transfer Payment

Net Domestic Product
 GDP - Depreciation

Net National Product
 GNP - Depreciation

Gross National Product
 GDP - Net foreign factor payment. 

What Counts in GDP?

Unit 2 - Feb. 3 (GDP)

•  Gross Domestic Product - The total value of all final goods/services produced within a country's border within a given year. All production or income earned in the U.S. 
• Ex. : Toyota - the product finishes on American soil, even if the company is located in Japan.

Formula = C + Ig + G + Xn

• C - consumption (personal). (Buying)
• Ig - gross private domesticated investment. (Inventory)
• G - government spending
• Xn - net export. (Exports & Imports).

·  Gross National Product - The total value of all final goods/services produced by Americans by a given year.

o Ex. : American citizen working in another country.

Market Economy Flow Chart

Unit 2 - Jan 31 (Circular Flow)

Circular Flow Model represents the flow of money, goods, and services.

• Factor Market - market where factors of production is bought and sold. (Resources)
• Ex: Volunteering - labor
• Product Market - market in which goods and services are bought and sold. (Goods)
• Ex: Getting a haircut.

Economics Actors

1. Firms - a business or organization that produces goods/services for sell. 
2. Households - a person or group of people that share an income.

Type of Markets

1. Traditional : All family members have the same occupation.
2. Communist : Run by others
3. Free Market : Make all the decisions themselves. (Hong Kong)
4. Mixed Market : Some decisions are made by the government and some are made by the people. (U.S.)

Introduction to the Business Cycle