Gross Domestic Product

Gross Domestic Product October-21-08 8:21 AM

By : DYNAFROM WANG National income accounts - accounts showing the level of total income and spending in the Canadian economy Gross Domestic Product - the total dollar value at current prices of all final goods and services produced in Canada over a given period. Income approach - a method of calculation GDP by adding together all incomes in the economy Expenditure approach - a method of calculating GDP by adding together all spending in the economy Product Current Price (p) Annual Output (Q) Total Dollar Value (PxQ) Lasers

$1000

3

$3000

Milk

2

1000

2000 GDP = $5000

GDP Identity - Gross domestic product calculated as total income is identical to GDP calculated as total spending. GDP expressed as total income = GDP expressed as total spending

The Income Approach - INCOME COMPONENTS OF GDP - wages, profit, interest, and rent. - GDP is the sum of 7 categories ○ Wages and salaries  Largest income category representing 50% of GDP; payment to workers. ○ Companies profits  Represents all corporate earnings declared to the government, profits paid as corporate income tax  Retained Earnings -profits kept by business for new investment ○ Interest income  Interest paid on business loans ○ Proprietors' incomes and rents  Sole proprietors and partnerships earnings ○ Indirect Taxes  PST, not included in main income components of GDP, value is included in expenditure approach ○ Depreciation  Durable assets considered a cost of doing business and shows up in both approaches. ○ Statistical Discrepancy  GDP figures are estimates, discrepancies between the approaches are known as statistical discrepancy, to balance the two figures, STAT can divides the difference between the two approaches. IE 1.4B in 2005, half of that 0.7B was added to lower the estimate of GDP, and HALF 0.7B was deducted from the higher GDP estimate

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