- 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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