Question

Write down the three identities of calculating the GDP of a country by the three methods. Also briefly explain why each of these should give us the same value of GDP.

Answer 1

Explanation:

Gross domestic product (GDP) is a fundamental measure of the economic performance of an economy. It is the market value of all the goods and services within a nation's limit in a year. [3] GDP Can be defined in three ways;  

1. Expenditure Method - Under this we add all the money that is spent by us, GDP = Consumer + Investor + Government + (eXporter - iMporter)
2. Income Method - Total factor income in a year (Wages+Total profit (Govt+Corporate)+Rent+Net interest income).
3. Output Method - This means, value of total produced goods & services in a year (value addition= product- raw material) summation of all value addition is GDP at output method.