38 Questions
What is the expenditure approach also known as?
Output Approach
Which of the following is NOT included in the calculation of GDP using the expenditure approach?
Depreciation
What is the formula for calculating GDP using the expenditure approach?
C + I + G + NX
What is the income approach also known as?
Earnings or Allocation Approach
What is included in the calculation of compensation of employees in the income approach?
Wages and salaries
What is the industry-origin approach also known as?
Value Added Approach
What is the purpose of the industry-origin approach?
To calculate the value added per unit
What is included in the industry-origin approach?
All three sectors: Agriculture, Fishery, and Forestry; Industry; and Service
What is the total market value of all final goods and services produced in a given year?
Gross Domestic Product (GDP)
What type of goods and services are purchased for final use by the consumer?
Final Goods
Why is it important to avoid multiple counting in GDP?
To avoid double counting of intermediate goods
What is the market value of a firm's output less the value of the inputs the firm has bought from others?
Value Added
In a five-stage production process, what is paid out as wages, rent, interest, and profit at each stage?
The difference between what a firm pays for a product and what it receives from selling the product
What is the correct way to calculate GDP?
Include only the value of the final product
What would happen if we include all intermediate sales in GDP?
We would get double counting
Which of the following transactions is excluded from GDP?
Stock market transactions
What consists of the money paid by private businesses to the suppliers of money capital?
Interests
Which sector represents value added of firms engaged in manufacturing?
Industry Sector
What is the formula for calculating Gross Domestic Product using the Industry-Origin Approach?
A + I + S = GDP
What is included in the Service Sector?
Transportation and communication
What is the term for the income Filipinos gain from supplying resources abroad?
Net Foreign Factor Income
What is the purpose of deducting Net Foreign Factor Income from National Income?
To exclude the income earned by foreigners
What is included in the Agriculture, Fishery, and Forestry sector?
Commercial and municipal fishing
What is the term for the cost of allocating the capital of a business over its lifetime?
Consumption of Fixed Capital
What is the total value of Agriculture, forestry, and fishing in the first year?
1,828,424
What is the total value of Government consumption in the first year?
2,739,671
What is the total value of Mining & Quarrying in the first year?
137,060
What is the total value of Capital formation in the first year?
3,129,566
What is the total value of Construction in the first year?
2,331,973
What is the total value of Breeding stock & orchard development in the first year?
421,946
What is the total value of Changes in inventories in the first year?
695,464
What is the total value of Wholesale and retail trade; repair of motor vehicles and motorcylces in the first year?
3,317,371
What is the total value of exports in the given data?
4,524,306
Which category has the highest value of imports of goods?
A. Imports of goods
What is the value of financial and insurance activities?
1,823,979
Which category does not have a corresponding value in the given data?
Statistical discrepancy
What is the value of real estate and ownership of dwellings?
1,081,612
What is the value of education?
719,494
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
Learn about the concept of Gross Domestic Product (GDP) and its components, including final goods, value added, and transfer payments.
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