Capital or consumer goods which are considered while calculating economic value of a country
Answers
Expenditure Approach
The most commonly used GDP formula, which is based on the money spent by various groups that participate in the economy.
GDP = C + G + I + NX
C = consumption or all private consumer spending within a country’s economy, including, durable goods (items with a lifespan greater than three years), non-durable goods (food & clothing), and services.
G = total government expenditures, including, salaries of government employees, road construction/repair, public schools, and military machines.
I = sum of a country’s investments spent on capital equipment, inventories, and housing.
NX = net exports or a country’s total exports less total imports.
#2 Income Approach
This GDP formula takes the total income generated by the goods and services produced.
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 income that a country’s citizens and companies generate in foreign countries, versus the total income foreign citizens and companies generate in that country.
#3 Production or Value-Added Approach
The sum of the value added to a product during the production process. To determine the value added between businesses, the price at which the product is sold by the seller is deducted from the price it was bought for from the supplier.