- Gross Domestic Product
- Methods of Calculating GDP
- Nominal Vs. Real GDP
- GDP, National Income, and Personal Income
- Relationship Between Saving, Investment, Fiscal Balance, and Trade Balance
- The IS Curve
- The LM Curve
- Aggregate Demand Curve
- Aggregate Supply Curve
- Shifts in Aggregate Demand Curve
- Shifts in Supply Curve
- Macroeconomic Equilibrium
- Economic Growth and Inflation
- Business Cycle and Economics
- Impact of Changes in Aggregate Supply and Demand
- Sources, Measurement, and Sustainability of Economic Growth
- The Production Function
Methods of Calculating GDP
Within the expenditure approach, there are two approaches:
Sum-of-value-added Approach
Under this approach, GDP is calculated as the sum of value added at each stage of production and distribution. For example, suppose the raw material was worth $100, it was processed and converted into semi-finished goods worth $120. Then these semi-finished goods are converted into finished goods worth $150. The same product is sold in retail at $180. The sum-of-value-added approach calculates the total value as follows:
| Stage | Sale Value | Value Added |
| Raw Material | $100 | $100 |
| Semi-finished Goods | $120 | $20 |
| Finished Goods | $150 | $30 |
| Retail | $180 | $30 |
| Sum of Value Added | $180 |
Value-of-final-output Approach
Under this approach, GDP is calculated by summing the values of final goods and services produced during the period. In the above example, we will directly take the value $180 of the product.
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