About GDP Calculation

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."

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.

Gross investment: This includes business investment in equipment, but not the exchange of existing assets.

Government consumption: This includes the sum spent by the government on final goods and services.

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

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.

Employee compensation: This measures the total amount paid to employees for the work they performed.

Proprietors' income: This is the income received by non-corporate businesses.

Rental income: This is the income received by property owners.

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.

Indirect business taxes: This includes general sales taxes, business property taxes, license fees, etc.

Depreciation: In terms of GDP, depreciation is also referred to as the capital consumption allowance.

Net income of foreigners: This refers to the income that domestic citizens earn abroad subtracted from the income a foreigner earns domestically.