Gross domestic product

(GDP)
PRESENTED BY
VAMSHI KRISHNA ATHKURI
RAMOJI BHARATH KUMAR
BANDARI PUNEETH
MOSES MICHAEL
GUBBALA KEERTHIKANTH
Gross domestic (GDP) is a monetary measure of
the market value of all the final goods and
services produced within a country in each year.
 History of GDP

•
William Petty came up with a basic concept of GDP to attack landlords against
unfair taxations during warfare between the Dutch and the English between 1652
and 1674.
• Charles Davenant developed the method further in 1695.
• The modern concept of GDP was first developed by Simon Kuznets for a US
Congress report in 1934.
 Determining the Gross domestic products

GDP can be determined in three way.

• Production (or output or value added) approach,
• Income approach or speculated
• Expenditure approach.
 Production approach

• This method also called Net product or value added method required 3 stages of
analysis.
• First gross value of output from all sectors is estimated.
• Second intermediate consumption such as cost of materials,supplies and services
used in production final output is derived.
• Third, gross output is reduced by intermediate comsumption to develop net
production
Income approach

• This method of determining GDP is to add up all the income

earned by households and firms in the year.
• The total expenditures on all of the final goods and services
are also income received as
1. wages
2. profits
3. rents
4. interest income
• By adding all wages, profits, rents and interest income
determine GDP.
 Determining the GDP Income Approach

• GDP = Total National Income + Sales Taxes + Depreciation + Net Foreign Factor
Income
• Total National Income – the sum of all wages, rent, interest, and profits.
• Sales Taxes – consumer tax imposed by the government on the sales of goods and
services.
• Depreciation – cost allocated to a tangible asset over its useful life.
• Net Foreign Factor Income – the difference between the total amount that a
country’s citizens and companies earn abroad, as well as the total amount foreign
citizens and companies earn in that country.
 Expenditure approach

• This method of determining GDP adds up the market value of al

domestic expenditures made on final goods in a single year, including
consumption expenditures, investment expenditures and net
exports.
• Add all of the expenditures together and you determine GDP.
 Determining the GDP in Expenditure
Approach

• GDP = Consumption + Investment + Government Spending + Net Exports or more

succinctly as
• GDP = C + I + G + NX
• consumption (C) -private-consumption expenditures by households and
nonprofit organizations.
• investment (I) -business expenditures by businesses and home purchases by
households.
• government spending (G) -expenditures on goods and services by the
government.
• net exports (NX)-nation’s exports minus its imports.
 Gross national product(GNP)

• Gross national product (GNP) is an estimate of total value of all the final products
and services turned out in a given period by the means of production owned by a
country's residents.

• GNP measures the total monetary value of the total output produced by a country's
residents.
• GNP is commonly calculated by taking the sum of personal consumption
expenditures, private domestic investment, government expenditure, net
exports and any income earned by residents from overseas investments, minus
income earned within the domestic economy by foreign residents.
GNP vs GDP
Determining the GNP

• The formula to calculate the components of GNP is

• Y = C + I + G + X + Z.
• C- Consumption.
• I-Investment
• G-Government.
• X -net exports, or imports minus exports.
• Z -net income earned by domestic residents from overseas investments - net
income earned by foreign residents from domestic investments.
Shortcomings of GDP

• Does not take into account non-market transactions

• Does not take into account the distribution kind and the quality of
the products.
• Calculation compexities.
• Does not account for the underground economy and economic
bads.
Nominal or Current GDP; Real GDP

• Nominal or current GDP is the value of all the final goods and
services based on the prices existing during the time period of
production.

• Real GDP is the value of all final goods and services produced
during a given time period based on the prices existing in a
selected base year.
Comparison between GDP of India and
Philippines

• India's diverse economy encompasses traditional village farming,

modern agriculture, handicrafts, a wide range of modern
industries, and a multitude of services. Slightly more than half of
the work force is in agriculture, but services are the major source
of economic growth, accounting for nearly two-thirds of India's
output, with less than one-third of its labor force. India has
capitalized on its large educated English-speaking population to
become a major exporter of information technology services,
business outsourcing services, and software workers.
• The economy of the Philippines has weathered global economic
and financial downturns better than its regional peers due to
minimal exposure to troubled international securities, lower
dependence on exports, relatively resilient domestic
consumption, large remittances from four- to five-million
overseas Filipino workers, and a rapidly expanding business
process outsourcing industry.
SUMMARY

• GDP: Gross Domestic Product is the total market or money value

of all goods and services produced in an economy over a period of
one year.
• GNP: Gross National Product s the total market or money value of
all final goods and services produced by a nation’s residents, no
matter where they are located.
• There are 3 ways to measure GDP:
• The expenditure approach
• The income approach
• The industrial origin approach
• expenditure approach GDP = Consumption + Investment + Government
Spending + Net Exports or more succinctly as
• GDP = C + I + G + NX
• income approach GDP = Total National Income + Sales Taxes + Depreciation +
Net Foreign Factor Income.
• The formula to calculate the components of GNP is
• Y = C + I + G + X + Z.
• GDB does not account for non-market transactions.
• GDB of a country depends on the main industries in the country,
it’s exports and imports and tourism.
Thank you