Expenditure Side GDP Calculation 869-886 q.50-100

• Government pension payments to a retired person are excluded from GDP on the expenditure side.
• Ia represents actual gross investment, including depreciation, in national-income accounting.
• Net exports enter the GDP equation as a separate category when calculating GDP from the expenditure side.
• If a Canadian firm imports $1000 worth of bananas and sells them for $2000, the effect on Canadian GDP increases the value of GDP by $1000.
• The investment component, Ia, includes changes in inventories when calculating GDP from the expenditure side.
• The government purchases component, Ga, excludes transfer payments when calculating GDP from the expenditure side.

Expenditure Side GDP Calculation

• GDP = Consumption expenditure + Gross investment expenditure + Government purchases + Net exports
• Using the provided data: $1302.40 + $402.00 + $486.80 + $94.00 = $2285.20

GDP Calculation (Expenditure Side)

• Using provided data, the value of GDP is $3866.

• If a firm's depreciation exceeds its gross investment, then its capital stock will be shrinking.

• In national-income accounting, payment for the construction of a custom-built new home by households is considered an investment expenditure.

• Money spent for services provided by a private consultant represents "government purchases".

• When measuring actual gross domestic product from the expenditure side, we use the equation: GDP = Ca + Ia + Ga + (Xa - IMa)

GDP Calculation - Income Side

• GDP calculation from the income side requires adding wages, interest, rent, depreciation, profits and indirect taxes net of subsidies.
• Net domestic income excludes the value of output that is used as replacement investment.
• Gross domestic product is the sum of factor incomes plus indirect business taxes, minus subsidies, plus depreciation.
• Net domestic income differs from gross domestic product as it represents GDP minus replacement investment.
• GST is included in non-factor payments when calculating GDP from the income side.

GDP Calculation (Income Side)

• Using provided data = $2285.20

• When calculating GDP from the income side, add together wages and salaries, interest and investment income, business profits, depreciation, and indirect taxes less subsidies.

• Net domestic income (at factor cost) from the provided data: $1910.80.

GDP Calculation (Income Side)

• GDP as calculated from the income side, use the provided data to get $3866.
• Net domestic income at factor cost from the provided data is $3728.
• Per capita GNP is the best measure of the average material living standards of domestic residents.
• Gross domestic product and gross domestic expenditure are conceptually identical.
• If the amount of income generated in Canada remitted to foreigners is greater than the amount of income generated abroad remitted to Canadian residents, then GNP is lower than GDP.
• GNP measures the total amount of income received by Canadian residents, while GDP measures the value of total output produced in Canada.
• GDP is inferior to GNP as a measure of the income accruing to Canadian residents.
• If profits generated at Canadian mines that previously flowed to Canadian owners are now remitted to foreign owners, Canadian GNP falls and Canadian GDP is unaffected
• If analyzing fluctuations in Canadian unemployment, you would be most interested in studying changes in GDP.
• Disposable personal income is the part of national income that is available to households to spend or save.
• Disposable personal income is calculated as GNP minus that part of it not actually paid to households, plus transfer payments, minus personal income taxes.
• A government transfer payment to a person is included in disposable income measures but not national income.
• Disposable Income is the most useful measure of aggregate income for estimating the increase in consumer demand for automobiles for the coming year.
• GNP is the best measure of total income received by Canadian citizens.
• Per capita Gross National Product is the most appropriate measure for evaluating the average material living standards of Canadian residents.

Economy Analysis

• GNP: $494 billion.
• Personal disposable income: $320 billion.
• Saving level, with consumption expenditure at $290 billion: $30 billion.
• Nominal GDP has increased faster than real GDP because the general price level has increased.
• Real GDP is the value of all goods and services produced in an economy per year adjusted for price changes.
• If nominal national income fell from $100 billion to $95 billion with 5% inflation, the real national income fell by 10%.
• If nominal national income increased by 10% during the year, when inflation was 5%, then the real national income rose by 5%.

GDP Figures in 2013:

• Nominal Gross Domestic Product: $1820.
• Real GDP (expressed in 2012 prices): $1010.
• Implicit GDP deflator (with 2012 as the base year): approximately 180.
• Consumer price index (CPI) (with 2012 as the base year, and if the output of all three goods is consumed): approximately 180.
• If 2012 is the base year, the GDP deflator in 2012 was 100.

Real GDP figures

• Real GDP for 2010 (2000 as the base year): $7975.
• Real GDP for 2000 (2010 as the base year): $9000.
• Nominal Gross Domestic Product in 2010 was $798 000.