GDP: Understanding Gross Domestic Product
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Questions and Answers

What is the expenditure approach also known as?

  • Industry-Origin Approach
  • Value Added Approach
  • Output Approach (correct)
  • Earnings Approach

    • Which of the following is NOT included in the calculation of GDP using the expenditure approach?

  • Government Spending
  • Net Exports
  • Consumption
  • Depreciation (correct)

    • What is the formula for calculating GDP using the expenditure approach?

  • C - I - G + NX
  • C + I + G + NX (correct)
  • C - I + G + NX
  • C + I + G - NX

    • What is the income approach also known as?

    <p>Earnings or Allocation Approach</p> Signup and view all the answers

    What is included in the calculation of compensation of employees in the income approach?

    <p>Wages and salaries</p> Signup and view all the answers

    What is the industry-origin approach also known as?

    <p>Value Added Approach</p> Signup and view all the answers

    What is the purpose of the industry-origin approach?

    <p>To calculate the value added per unit</p> Signup and view all the answers

    What is included in the industry-origin approach?

    <p>All three sectors: Agriculture, Fishery, and Forestry; Industry; and Service</p> Signup and view all the answers

    What is the total market value of all final goods and services produced in a given year?

    <p>Gross Domestic Product (GDP)</p> Signup and view all the answers

    What type of goods and services are purchased for final use by the consumer?

    <p>Final Goods</p> Signup and view all the answers

    Why is it important to avoid multiple counting in GDP?

    <p>To avoid double counting of intermediate goods</p> Signup and view all the answers

    What is the market value of a firm's output less the value of the inputs the firm has bought from others?

    <p>Value Added</p> Signup and view all the answers

    In a five-stage production process, what is paid out as wages, rent, interest, and profit at each stage?

    <p>The difference between what a firm pays for a product and what it receives from selling the product</p> Signup and view all the answers

    What is the correct way to calculate GDP?

    <p>Include only the value of the final product</p> Signup and view all the answers

    What would happen if we include all intermediate sales in GDP?

    <p>We would get double counting</p> Signup and view all the answers

    Which of the following transactions is excluded from GDP?

    <p>Stock market transactions</p> Signup and view all the answers

    What consists of the money paid by private businesses to the suppliers of money capital?

    <p>Interests</p> Signup and view all the answers

    Which sector represents value added of firms engaged in manufacturing?

    <p>Industry Sector</p> Signup and view all the answers

    What is the formula for calculating Gross Domestic Product using the Industry-Origin Approach?

    <p>A + I + S = GDP</p> Signup and view all the answers

    What is included in the Service Sector?

    <p>Transportation and communication</p> Signup and view all the answers

    What is the term for the income Filipinos gain from supplying resources abroad?

    <p>Net Foreign Factor Income</p> Signup and view all the answers

    What is the purpose of deducting Net Foreign Factor Income from National Income?

    <p>To exclude the income earned by foreigners</p> Signup and view all the answers

    What is included in the Agriculture, Fishery, and Forestry sector?

    <p>Commercial and municipal fishing</p> Signup and view all the answers

    What is the term for the cost of allocating the capital of a business over its lifetime?

    <p>Consumption of Fixed Capital</p> Signup and view all the answers

    What is the total value of Agriculture, forestry, and fishing in the first year?

    <p>1,828,424</p> Signup and view all the answers

    What is the total value of Government consumption in the first year?

    <p>2,739,671</p> Signup and view all the answers

    What is the total value of Mining & Quarrying in the first year?

    <p>137,060</p> Signup and view all the answers

    What is the total value of Capital formation in the first year?

    <p>3,129,566</p> Signup and view all the answers

    What is the total value of Construction in the first year?

    <p>2,331,973</p> Signup and view all the answers

    What is the total value of Breeding stock & orchard development in the first year?

    <p>421,946</p> Signup and view all the answers

    What is the total value of Changes in inventories in the first year?

    <p>695,464</p> Signup and view all the answers

    What is the total value of Wholesale and retail trade; repair of motor vehicles and motorcylces in the first year?

    <p>3,317,371</p> Signup and view all the answers

    What is the total value of exports in the given data?

    <p>4,524,306</p> Signup and view all the answers

    Which category has the highest value of imports of goods?

    <p>A. Imports of goods</p> Signup and view all the answers

    What is the value of financial and insurance activities?

    <p>1,823,979</p> Signup and view all the answers

    Which category does not have a corresponding value in the given data?

    <p>Statistical discrepancy</p> Signup and view all the answers

    What is the value of real estate and ownership of dwellings?

    <p>1,081,612</p> Signup and view all the answers

    What is the value of education?

    <p>719,494</p> Signup and view all the answers

    Study Notes

    Gross Domestic Product (GDP)

    • The total market value of all final goods and services produced in a given year within a country.
    • Includes all goods and services produced by citizen-supplied or foreign-supplied resources employed within the country.
    • Avoiding multiple counting: all goods and services produced in a particular year must be counted once and only once.

    Included and Excluded Items

    • Included: Final Goods, Value Added, Public Transfer Payments, Private Transfer Payments
    • Excluded: Intermediate Goods, Nonproduction Transactions, Stock Market Transactions, Secondhand Sales

    Value Added

    • The market value of a firm's output less the value of the inputs the firm has bought from others.
    • Example: In a five-stage production process, the difference between what a firm pays for a product and what it receives from selling the product is paid out as wages, rent, interest, and profit.

    Three Approaches to GDP

    • Expenditure Approach: Add up all spending on final goods and services that has taken place throughout the year.
    • Income Approach: Also called the Earnings or Allocation Approach, it adds up the income earned by individuals and businesses in the country.
    • Industry-Origin Approach: Also called the Value Added Approach, it adds up the value added per unit over all units sold.

    Expenditure Approach

    • C + I + G + NX = GDP
    • Consumption: Spending by households on final goods and services
    • Investment: Spending by private businesses on capital goods, changes in inventories, and construction
    • Government Spending: Spending by government on final goods and services
    • Net Exports: Exports minus imports

    Income Approach

    • Compensation of Employees: Income received by employees as wages and salaries
    • Rents: Income received by households and businesses that supply property resources
    • Interests: Income received by suppliers of money capital
    • Proprietors Income: Net income of sole proprietorships, partnerships, and other unincorporated businesses
    • Corporate Profits: Composed of corporate income taxes, dividends, and undistributed corporate profits

    Industry-Origin Approach

    • A + I + S = GDP
    • Agriculture, Fishery, and Forestry Sector: Captures value added from the production of agricultural crops, ornamental plants, and livestock
    • Industry Sector: Represents value added of firms engaged in mining, manufacturing, construction, and utilities
    • Service Sector: Consists of subsectors such as transportation, communication, finance, trade, and others

    Example Data

    • Agriculture, Fishery, and Forestry Sector: 1,828,424 and 1,954,345
    • Industry Sector: 5,098,232 and 5,607,011
    • Service Sector: 11,024,918 and 11,849,213

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    Description

    Learn about the concept of Gross Domestic Product (GDP) and its components, including final goods, value added, and transfer payments.

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