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GDP Calculator
The GDP (gross domestic product) can be calculated using either the expenditure
approach or the resource cost-income approach below. If any clarification on the
terminology or inputs is necessary, refer to the information section below the
calculators.

Expenditure Approach
Using this approach:
GDP = personal consumption + gross investment + government consumption + net
exports of goods and services
Personal Consumption

Gross Investment

Government Consumption

Exports

Imports

Calculate

Resource Cost-Income Approach

Using this approach:
GNP = employee compensation + proprietors' income + rental income + corporate
profits + interest income
GDP = GNP + indirect business taxes + depreciation + net income of foreigners*
Employee Compensation

Proprietors' Income

Rental Income

Corporate Profits

Interest Income

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 Indirect Business Taxes

Depreciation

Net Income of Foreigners*

Calculate

* net income of foreigners refers to the income that domestic citizens earn abroad
subtracted from the income foreigners earn domestically.

Gross Domestic Product

Gross domestic product is defined by the Organisation for Economic Co-operation and
Development (OECD) as "an aggregate measure of production equal to the sum of the
gross values added of all resident and institutional units engaged in production (plus
any taxes, and minus any subsidies, on products not included in the value of their
outputs." More simply, it can be defined as a monetary measure of the market value of
final goods produced over a period of time, typically quarterly or yearly, that is often
used to determine economic performance of a region or country. Generally, growth of
more than two percent indicates significant prosperous activity in the economy. On the
other hand, two consecutive three-month periods of contraction may indicate that an
economy is in recession.

Measuring GDP1,2,3
GDP can be measured in a number of different ways:

 Production approach: This is the gross value of the goods and services added by
all sectors of the economy such as agriculture, manufacturing, energy,
construction, the service sector, and the government. In each sector, gross value
added = gross value of output - value of intermediate consumption. Most
countries use this production approach. However, one major drawback of this
approach is the difficulty to differentiate between intermediate and final goods.
 Resource cost-income approach: Consists of the addition of the value of profit
and wages, as well as indirect business taxes, depreciation, and the net income
of foreigners.
 Spending approach: This is the value of the goods and services purchased by
households and government, including investment in machinery and buildings. It
also includes the value of exports reduced by the total value of imports.

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 In the United States, the Commerce Department undertakes the major project of
estimating GDP using all three approaches every three months. Collecting data involves
surveying hundreds of thousands of firms and households. Data is also collected from
government departments overseeing activities such as agriculture, energy, health, and
education, which results in an enormous amount of data. This typically results in an
initial estimate being made based on a partial compilation of the data. Once the full data
is available and has been analyzed (usually a few months later), a revised estimate is
often released.
According to the International Monetary Fund, not all productive activity is included in
estimates of GDP. For example, unpaid work (such as that performed at home or by
volunteers) and black-market activities are not included because they are difficult to
measure and cannot easily be verified. Thus, a baker that bakes a loaf of bread for a
customer would contribute to GDP, but would not do so if he baked that same loaf for
his family (but the ingredients he purchased would).
The calculators above measure GDP using two of the above approaches: The
expenditure approach and the resource cost-income approach. The production
approach is just an simple addition of the added values of all sectors.

Expenditure Approach:

GDP = personal consumption + gross investment + government consumption + net

exports of goods and services

 Personal consumption: This is typically the largest GDP component in the

economy that is comprised of durable goods, nondurable goods, and services
such as food, rent, jewelry, gasoline, and medical expenses (not including the
purchase of new housing)
 Gross investment: This includes business investment in equipment, but not the
exchange of existing assets. For example, the construction of a new factory and
the purchase of machinery and equipment for said factory would constitute a
gross investment. The purchase of financial products is classified as "saving"
rather than investment.
 Government consumption: This includes the sum spent by the government on
final goods and services such as public servant salaries, weapon purchases, and
any investment expenditures, but not including transfer payments like social
security or unemployment benefits.
 Net exports: This includes gross exports and gross imports, where the net value
is the result of subtracting gross imports from gross exports.

Resource Cost-Income approach:

GNP = employee compensation + proprietors' income + rental income + corporate

profits + interest income
GDP = GNP + indirect business taxes + depreciation + net income of foreigners

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  GNP (Gross national product): GNP is similar to GDP in that it is the market
value of all products and services produced in a year through the labor and
property supplied by the country's citizens. As shown in the above formula, it is
included in GDP along with indirect business taxes, depreciation, and net income
of foreigners.
 Employee compensation: This measures the total amount paid to employees for
the work they performed including wages, salaries, and employer contributions to
social security and other similar programs.
 Proprietors' income: This is the income received by non-corporate businesses,
which includes sole proprietorships and partnerships. It includes payments for
labor, capital, land, and entrepreneurship.
 Rental income: This is the income received by property owners, but excludes
rent paid to corporate real estate companies.
 Corporate profits: This is a corporation's income, regardless whether it is paid to
stockholders or reinvested.
 Interest income: Interest income is a form of property income that owners of
certain kinds of financial assets receive in return for their investment in those
assets, such as deposits, debt securities, and loans.
 Indirect business taxes: This includes general sales taxes, business property
taxes, license fees, etc., but does not include subsidies.
 Depreciation: In terms of GDP, depreciation is also referred to as the capital
consumption allowance and measures the amount that a country must spend to
maintain, rather than increase its productivity.
 Net income of foreigners: This refers to the income that domestic citizens earn
abroad subtracted from the income a foreigner earns domestically.

Gross domestic product as a comparison of living standards

Typically, nominal GDP estimates are used as a comparison between regions and
countries. However nominal GDP does not take factors such as cost of living in an area
into account, and fluctuations in exchange rate of a country's currency among other
factors can result in significant differences in the reported nominal GDP. As such, when
comparing differences in living standards between nations, GDP per capita at
purchasing power parity (PPP) can be a better indicator than nominal GDP. This is
because PPP allows the estimate of what the exchange rate between two countries
would need to be in order for the exchange to be on par with the purchasing power of
the two different currencies. Regardless whether a basket of goods is purchased
directly with one currency, or the currency is converted at the PPP rate to the other
currency then used to buy a basket of goods, the purchasing power will remain the
same. Thus, GDP per capita at PPP can be more representative of differences in living
standards since it accounts for differences in cost of living.

1. Wikipedia: The Free Encyclopedia. https://en.wikipedia.org.

2. Investopedia. https://www.investopedia.com.

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 3. Bureau of Economic Analysis. "Glossary: National Income and Product Accounts."
https://www.bea.gov.

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