Content

• Steps
• Method 1 of 3: Calculate GDP by Expenditure
• Method 2 of 3: Calculating GDP by Income
• Method 3 of 3: Difference Between Nominal and Real GDP
• Tips

GDP, gross domestic product, is all that the country has produced during the year. GDP is often used to compare the economies of countries with each other. Economists, in turn, calculate GDP in two ways: by spending and by income. However, you can always calculate the GDP yourself - all the data is in the public domain, and we will teach you how to calculate!

Steps

Method 1 of 3: Calculate GDP by Expenditure

1. 1 Start with consumer spending. Consumer spending is how much the residents of the country spent in total on goods and services in a year.
   • Shopping for food, paying for treatment, purchasing tools and games are all consumer spending.
2. 2 Add investment. In this case, we do not mean purchases of stocks and bonds, but money spent by enterprises to purchase goods and services necessary for their further work.
   • Has the company bought building materials, machines, programs, hired employees and built a plant? Investments.
3. 3 Add the difference between import and export. More precisely, the amount of imports must be subtracted from the amount of exports - nevertheless, the gross domestic product is calculated - and the result must be added to the equation.
   • If there are more imports than exports, then the result, of course, will be negative.Then it will not have to be added, but subtracted.
4. 4 Add government spending. When calculating GDP, one should not forget about everything that the government has spent money on.
   • Public sector salaries? Infrastructure costs? For the defense industry? All there. But insurance and unemployment benefits no longer fit here, since this money is not spent, but, as it were, transferred.

Method 2 of 3: Calculating GDP by Income

1. 1 Start with salaries. Add up all salaries, benefits, pensions, benefits, and more.
2. 2 Add rental income. Everything that is earned in a year from renting out real estate should be added.
3. 3 Interest. Be sure to add the interest accrued on the amounts in circulation to the equation.
4. 4 Add income for smallholders. Or, more precisely, the income of a small business.
5. 5 Add corporate profits. More precisely, the income received by the owners of the shares.
6. 6 Also include income from additional activities. This is money received from the sale of licenses, permits, and so on.
7. 7 Calculate the level of depreciation and add it to the equation. In other words, find out how much the value of goods has decreased.
8. 8 Add total income from foreign intermediaries. To do this, you need to find how much the citizens of the country received from abroad and subtract from this amount the money sent by the citizens of your country abroad.

Method 3 of 3: Difference Between Nominal and Real GDP

1. 1 If you find this difference, then the picture will become clearer. The main difference is inflation, which is taken into account when calculating real GDP. If we forget about inflation, GDP will grow and grow, which is not surprising - prices are going up.
   • Let's say the GDP of country A in 2012 was $ 1 billion. In 2013, only $ 500 million was put into circulation. So in 2013 the GDP will be higher than in 2012. However, this does not reflect the whole picture - all progress will be nullified if we take inflation into account.
2. 2 Select a base year. Basic - that is, the one with which you will compare. Actually, the essence of real GDP is in comparison. It is worth choosing the year preceding the one for which you find the GDP.
3. 3 Calculate how much prices have risen from the base year. This value is called "deflator". Note that if there is inflation, then the deflator will be above 100. For example, if inflation is 25%, it will be 125.
   • If deflation was observed in the country, then the deflator will be less than one. With a deflation level of the same 25%, the deflator value will be 75.
4. 4 Calculate nominal GDP using the deflator. Real GDP, in turn, is equal to “Nominal GDP / 100”. The proportion is as follows: nominal GDP / real GDP = deflator / 100.
   • Let's say the nominal GDP is 10 million, the deflator is 125. This is what we get:
     • 10 million / real GDP = 125/100
     • 10 million / real GDP = 1.25
     • 10 million = 1.25 / real GDP
     • 10 Million / 1.25 = Real GDP
     • 8 million = real GDP

Tips

• There is a third way to find GDP - value added. The total value added for goods and services is calculated for each stage of production. However, due to the complexity of the calculations, this method is not often used.
• GDP per capita is how much the gross domestic product is accounted for by one citizen of the country. This indicator is also widely used when it comes to comparing the effectiveness of a particular economy. It is easy to calculate this value: it is enough to divide the GDP by the population of the country.