Gross Domestic Product (GDP): Measures the Total Output of Goods and Services for Final

Social

Gross Domestic Product (GDP): Measures the total output of goods and services for final use occurring within the domestic territory of a given country, regardless of the allocation to domestic and foreign claims.

GDP purchaser values (market prices) = Output based

Gross value added by all producers + Any taxes – Any subsidies

Resident Non-resident

Net GDP = Gross GDP – Depreciation

Gross Value added = value added = net value added =

All outputs – intermediate inputs

Notes: Outputs = Finished goods = Sales / Inputs = Purchases

Gross domestic product is converted to international dollars using Purchasing Power Parity (PPP) rates.

GDP Expenditure based = Total final expenditures at purchasers’ prices.

Exports - Imports

GDP Income based =

Compensation of employees + Taxes – Subsidies + Gross mixed income + Gross operating surplus

GDP Output based =

Gross value added of all produces + Taxes – Subsidies

Question No. 1

When calculated GDP by the following:

GDP = Total value of exports – Total value of imports; in this case we have

o  GDP expenditure based

o  GDP income based

o  GDP output based

o  GDP value added based

Gross national Production (GNP): The ending value of goods and services produced within a given period.

These goods and services are valuable in view of three alternatives:

1- Direct consumption by people.

2- Storage and adding the value to the national wealth.

3- Exporting them to other foreign countries.

GNP Gross National Production =

Gross domestic product (GDP) + Net exports (exports - Imports)

Net GNP = (Gross GNP – Depreciation) Or (Net GDP + Net exports)

Following are some giving data for one economy:

·  Taxes= 10,000

·  Sales = 500,000

·  Depreciation= 20,000

·  Subsidies= 5,000

·  Purchases= 100,000

·  Imports= 250,000

·  Exports= 400,000

Required:

1- Net GDP.

2-Net GNP.

Solution:

Gross GDP = Gross value added by all producers (Sales - Purchases) + Any taxes – subsidies = (500,000 – 100,000) + 10,000 – 5,000 = 405,000.

1- Net Gross GDP = Gross GDP – Depreciation = 405,000 – 20,000 = 385,000.

Gross GNP = (GDP) + Net exports = 405,000 – (400,000 – 250,000) = 555, 000.

2- Net GNP = (Gross GNP – Depreciation) Or (Net GDP + Net exports)

(555,000 – 20,000) = 535,000 Or (385,000 + 150,000) = 535,000.

End of part 3