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


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
Indirect Business Taxes
Depreciation
Net Income of Foreigners*

* 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 the 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 GDP

GDP can be measured in a number of different ways:

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 a simple addition of the added values of all sectors.

Expenditure Approach:

GDP = personal consumption + gross investment + government consumption + net exports of goods and services

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

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 the 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 of 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 the cost of living.

Home Financial Fitness & Health Math Other