Content

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GDP stands for gross domestic product and is a measure of all goods and services produced by a country in a year. GDP is often used in economics to compare output across countries. Economists calculate GDP using two main methods: the expenditure method - the measure of total expenditure and the income-based method - the measure of total income. The CIA World Factbook website provides all the data needed to calculate the GDP of every country in the world.

Steps

Method 1 of 3: Calculate GDP using the expenditure method

1. 

   Starting with personal consumption. Personal consumption measures the total expenditure of consumers on goods and services in a country for a year.
   • Examples of personal consumption include purchases of consumable goods such as food and clothing, durable goods such as tools and furniture, and services such as a haircut or doctor's visit.

2. 

   
   
   Plus investment. For economists, when calculating GDP, investment is not the amount of shares and bonds bought, but it is the amount of money a business uses to obtain goods and services to support or maintain a business.
   • Examples of investments include contractual supplies or services used when a business builds a new factory, equipment and software orders that help the business run efficiently.

3. 

   
   
   Add the trade surplus. Since GDP only counts domestically produced products, imports must be eliminated. Exports must be added because once they leave national borders, they will not be included in personal consumption. To take into account exports and imports, subtract the total value of exports from the total value of exports. Then, add the results to the equation.
   • If a country imports more than it exports, the number will be negative. If the number is negative, subtract it instead of adding it.

4. 

   
   
   Add government consumption. The amount of money a government spends on goods and services must be added to when calculating GDP.
   • Examples of government consumption include civil service salaries, infrastructure and defense spending. Social insurance and unemployment benefits are considered transfers and are not included in government spending: this amount simply passes from person to person.
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Method 2 of 3: Calculate GDP using the income method

1. 

   Starting with employee salaries and remuneration. This is the sum of all salaries, wages, benefits, pensions and social insurance contributions.

2. 

   Plus rental income. Rent is simply all income earned from property ownership.

3. 

   Add interest. All interest (money earned from financing) must be added.

4. 

   Add owner income. Owner income is money earned by a business owner, including a joint stock company, partnership or private business.

5. 

   Plus corporate profits. This is the income earned by shareholders.

6. 

   Add indirect business tax. These are all sales tax, corporate property tax, and licensing fees.

7. 

   Calculate and add all depreciation. This is a decrease in the value of the good.

8. 

   Plus net foreign income. For the calculation, subtract the total income from domestic production from abroad of the domestic citizen minus the total payment of domestic production to the foreign entity. advertisement

Method 3 of 3: Distinguish real and nominal GDP

1. 

   Distinguish between real and nominal GDP for a more accurate picture of what a country is doing. The main difference between real and nominal GDP is that real GDP takes inflation into account. If you don't take inflation into account, you can believe that a country's GDP is increasing when, in fact, their prices are increasing.
   • Think of them as follows. If country A's GDP in 2012 is 22,000 billion VND but in 2013, this country prints and put into circulation 11,000 billion VND, of course Its GDP in 2013 will be larger than that of 2012. However, this increase does not well reflect the output of goods and services produced in country A. Real GDP effectively eliminates the inflationary increase. play this.

2. 

   Select the base year. Your base year may be one year, five years, 10 or even 100 years earlier. You need to choose a year to compare inflation. Because, in essence, real GDP is one compare. And a comparison is only really a comparison if two or more factors - years and numbers - are compared. For a simple real GDP calculation, choose the year that comes before the time you are looking at.

3. 

   Determine how much price has increased over the base year. This number is also known as the "deflator index". For example, if the base-year inflation rate to the present year is 25%, the inflation rate will be expressed as 125 or 1 (100%) plus 25 (25%) multiplied by 100. In all cases inflation, the deflator will be greater than 1.
   • For example, if the country you are planning is actually going through the stage deflation, in the case in which the purchasing power of a currency increases rather than decreases, the deflator will fall below 1. Assume the deflator rate from the previous period to the present period is 25%. That means that one currency can buy 25% more than it used to be. Your deflator will be 75 or 1 (100%) minus 25 (25%) times 100.

4. 

   Divide nominal GDP by the deflator. Real GDP equals this ratio multiplied by 100. It is represented by the following equation: Nominal GDP ÷ Real GDP = Deflator ÷ 100.
   • So, if your present nominal GDP is 220 billion dong and deflator is 125 (base-to-present inflation is 25%), here's how to set up your equation. :
     • VND 220,000,000,000 ÷ Real GDP = 125 ÷ 100
     • VND 220,000,000,000 ÷ Real GDP = 1.25
     • 220,000,000,000 VND = 1.25 X Real GDP
     • 220,000,000,000 VND ÷ 1.25 = Real GDP
     • 176,000,000,000 VND = Real GDP
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Advice

• GDP per capita measures the average amount of domestic product produced by an individual in a country. GDP per capita can be used to compare the productivity of countries with large population differences. To calculate GDP per capita, divide the country's population by gross domestic production.
• The third way to calculate GDP is the value-added method. This method calculates the total added value at each production step of the goods and services. For example, adding the added value of rubber when the rubber is converted to a tire. Next, add the added value of all car parts when they are assembled into a complete car. This method is not widely used because it is possible to double and exaggerate the real market value of GDP.