The GDP calculation is not taken into account. Gross Domestic Product (GDP) and Gross National Product (GNP). Definition of GDP, history of origin and calculation methods

To define such a concept as GDP, there is absolutely no need to use a lot of complex terms and formulations. Simple, understandable words are quite suitable for this purpose. So, let's try to decide what GDP is and why this indicator is needed.

First of all, it should be noted that the term GDP or gross domestic product of a country is used to determine the rate of economic development of any state.

In simple terms, GDP is the total value of goods, works and services that were produced and provided in the territory of one country during the year.

This indicator was first calculated in the 30s of the 20th century by economist Simon Kuznets. Subsequently, the specialist received the Nobel Prize.

Today, two important indicators are used in the economic sphere: GDP and GNP. The concepts differ from each other, although they are aimed at determining the economic indicators of the state. When calculating the gross domestic product, financial indicators are taken into account that do not depend on the nationality of the enterprises involved in the production of products. The most important thing is that the enterprise is located on the territory of the state.

To calculate the domestic national product (GNP), only the products of those production facilities that are considered national are taken into account.

What is GDP?

As we have already noted, the term has a very simple definition - it is the cost of everything that is produced in the state. The calculation of the indicator is multi-level and its implementation is carried out by special services. It is generally accepted that GDP is expressed in US dollars, however, today the following options are also used:

• national currency of the country;
• monetary unit of any state, in accordance with the exchange rate.

The dollar is used to compare the GDP of different countries to compile ratings and assess the current economic situation.

What types of GDP are there?

To get a more complete understanding of the indicator, it is worth getting acquainted with its types. So, let's look at this issue in more detail and note that GDP can be:

• real;
• nominal.

Real GDP is an indicator that is used to account for growth in production without using its financial side. As a rule, this parameter is expressed in prices of the year that was taken as the main one when making calculations. For example, to calculate the indicator for last year, Rosstat used price data for 2011 as a basis.

The advantage of the indicator is that it allows you to determine the growth of a country’s trade turnover. Real GDP does not depend on changes in exchange rates and other economic parameters. It is this indicator that draws conclusions about the current state of the economy in the country.

For example, real GDP will allow you to quickly understand whether there is a crisis in the country and how difficult the economic situation has already developed. For countries whose economies are stable, real and nominal GDP are the same.

The nominal indicator is GDP calculated in current prices. The cost of certain goods is determined at the time of collection and is subsequently used for making calculations. When a country experiences an increased level of inflation, GDP may increase, however, such a reaction will be formal and the reason for it will be a real decrease in production capacity.

In fact, nominal GDP serves to reflect the rise or fall in the cost of goods and services within a country, without touching the dynamics of economic development as a whole. Nominal GDP serves as a unique tool for economists to draw certain conclusions and make forecasts.

An example is the situation of a change in an indicator. If, with a constant increase in prices, the level of demand begins to fall, then nominal GDP will decrease significantly.

What is “GDP per capita” and “GDP at PPP”?

Economists often use the term “GDP per capita.” This indicator is used to identify important indicators of a state or a specific region. It is very easy to calculate this indicator using a simple formula:

GDP per capita = total GDP / per number of citizens living in the country.

This parameter is also used to compare economic indicators in different countries. In fact, this indicator cannot be considered absolute and accurate, since the data used in the calculation changes periodically and is not always real.

PPP is another term that needs to be deciphered. Purchasing power parity is encrypted under this concept. This indicator is used to compare data in different countries and in different monetary units. In other words, GDP at PPP is the ability of a citizen of one state to purchase the goods of another with his available income.

When conducting international comparisons, the UN compares about 700 basic goods, 250 investment objects, 15 objects under construction.

Methods for calculating GDP

The classic formula for calculating GDP is quite simple:

GDP = Gross Value Added + Taxes on Products and Imports - Subsidies on Products and Imports, however, different formulas may apply when certain calculation techniques are used. There are several methods for calculating this indicator. Let's note the most famous and simple ones:

1. Production method or value added. To calculate GDP, the value added indicator and the market valuation of production in the state are taken as the basis. The method is production
2. Distribution methodology or by income. To calculate GDP using this method, the following types of income are used: all salaries and bonuses paid to the population, income from land rental, interest on the use of borrowed funds. Direct taxes and salaries of civil servants are not taken into account.
3. End use or cost method. To calculate the indicator, it is necessary to use the following types of expenses: consumer, government, investment, net exports.

There is a special calculation formula for this method:

C - personal consumer expenses;

I—gross investment;

G – government procurement of goods and services;

Xn is net export.

Each method has its own characteristics and subtleties. In our country, all three calculation methods are used, however, the greatest preference is given to the distribution method.

GDP in the Russian Federation

Every year, Russian President V. Putin convenes a press conference where he reports on the current indicators of the country's GDP. Last year, such a meeting took place at the end of December, where the President said that in 2016 there was a decline in GDP, however, it was within the normal range and amounted to 0.5-0.6%. If we compare the figures for 2015, when GDP was 3.7%, we can note that the drop was insignificant. Moreover, in November last year, there was a slight increase in the indicator, which could be the beginning of an increase in the pace of the economy in the state.

Dmitry Medvedev also expressed his opinion on this issue. The Prime Minister confirmed that the country has gone through one of the most difficult periods in its history and today we can say that the state has adapted to the fall in oil and gas prices. According to Medvedev, the economic decline was stopped and the GDP indicators were:

• nominal GDP – 1,267 billion US dollars;
• PPP - 3,745 billion US dollars.

As for the level of GDP in 2017, it is worth noting that already in the first months of the new year, GDP growth was noted, and by the end of the year it amounted to 1.1%.

What is the significance of the GDP indicator for the state?

As we have already noted, GDP is an indicator that includes the total value of all products, goods and services that the state produced during the year. This parameter is of great importance for each country, since it allows one to determine the trends and speed of economic development of the state. The following features are characteristic of GDP:

• the indicator is measured in dollars to allow further comparison;
• within the country, data are calculated in national currency;
• the indicator is recalculated annually;
• GDP is formed not only from government, but also from private income;
• the indicator fully reflects the stage of economic development of the country.

In order for GDP to be calculated as accurately as possible, it is not enough to take the basic general figures and make the calculations. To get a more complete picture of the development of the state, to determine GDP, namely, to understand which sectors are the most profitable, it is worth checking such indicators.

For example, in Russia, the most efficient and profitable industries are those related to the sale of oil and gas; accordingly, income received from this source plays a special role in the formation of GDP.

Conclusion

GDP is a very simple concept that can be described in simple words and phrases, without using complex terms and concepts. Our article was written so that even people without economic education can obtain the desired information without delving into complex formulations and calculations.

The work provides simple definitions of basic concepts and describes the main methods for calculating GDP, which allow you to get an idea of ​​the most important economic indicator of any state.

The purpose of the lesson: teach students to calculate the main indicators of the system of national accounts.

Students should know: indicators of the system of national accounts “gross domestic product”, “net national product”, “national income”, “personal income”, “personal disposable income”. Difference between gross domestic product (GDP) and gross national product (GNP). Methods for calculating gross domestic product. Formulas for calculating real and nominal GDP, GDP deflator.

Students should be able to: analyze statistical data on main macroeconomic indicators. Calculate GDP using different methods using conditional examples. Calculate real and nominal GDP, GNP deflator, net national product, national income, personal income, personal disposable income using conditional examples.

Lesson plan:

1. Explanation of the concepts of gross domestic product and gross national product - 10 min.
2. Calculation of GDP by different methods, net national product, national income, personal income, personal disposable income - 15 min.
3. Calculation of real and nominal GDP, GNP deflator – 15 min.
4. Test 3 min.
5. Homework – 2 min.

Lesson Description:

1. Definition.

One of the main macroeconomic indicators that evaluate the results of economic activity is gross domestic product (GDP) and gross national product (GNP).

GDP is the market value of all final goods and services produced in a country during the year, regardless of whether the factors of production are owned by residents of the country or owned by foreigners (non-residents).

GNP is the market value of all final goods and services produced in a country during the year. GNP measures the value of products created by factors of production owned by citizens of a given country (residents), including in the territory of other countries - this is called net factor income.

GNP = GDP + net factor income.

Net factor income from abroad is equal to the difference between the income received by citizens of a given country abroad and the income of foreigners received in the territory of a given country.

Our country's GDP in 2003 was 9.3 trillion. rub.

Dividing a country's GDP by the number of its citizens yields an indicator called “GDP per capita.” The higher the GDP per capita, the higher the standard of living in the country.

Final goods and services are those that are purchased during the year for final consumption and are not used for intermediate consumption (that is, in the production of other goods and services).

GDP does not include the costs of purchasing goods produced in previous years (for example, buying a house built five years ago), as well as the costs of purchasing intermediate products (raw materials, materials, fuel, energy, etc., used to produce final products). products).

For example, food prepared at home and in a restaurant may be exactly the same, but only the cost of the latter is included in GDP. A servant and a housewife can do the same work, but only the servant's wages will be included in the GDP. The volume of production in the shadow economy is not taken into account in GDP.

Example: “A tire production company sells 4 tires worth 4,000 rubles to a car manufacturing company.

Another company sells a player to a car company for 3,000 rubles. Having installed all this on a new car, the car company sells it to consumers for 200,000 rubles. What amount will be included in the calculation of GDP?”

Answer: GDP will include the cost of the final product - a finished car, 200,000 rubles. The cost of tires and player is included in the intermediate product. If the player was purchased in a store for your own use. Its value would be included in the GDP of that year.

2. When calculating GDP the following conditions should be taken into account. Everything that is produced in the country will be sold. Therefore, you can simply calculate how much consumers - the end users of manufactured products - spend on their purchase. Thus, we can imagine GDP as the sum of all expenses necessary to buy the entire volume of production on the market.

You can look at the same problem from the other side. What consumers spend on goods. Received as income by those who participated in their production. Income from the sale of manufactured goods is used to pay wages to workers, rent to the owner of the land (if the enterprise is located on land owned by another owner), interest on loans received from the bank, profit - the income of the owner of the company.

In accordance with this approach, there are two ways to calculate GDP:

a) on expenses;
b) by income.

When calculating GDP by expenditure, the expenditures of all economic agents are summed up: households, firms, the state and foreigners (expenses on our exports). Total expenses consist of:

• personal consumer expenses, including household expenses on durable goods and current consumption, on services, but not including expenses on the purchase of housing;
• gross investment, including industrial capital investment, or investment in fixed assets, investment in housing construction, investment in inventories. Gross investment can be thought of as the sum of net investment and depreciation. Net investment increases the stock of capital in the economy;
• public procurement of goods and services, for example, for the construction and maintenance of schools, roads, the maintenance of the army and the state apparatus. This does not include transfer payments (benefits, pensions, social security payments);
• net exports of goods and services abroad, calculated as the difference between exports and imports.

GDP by expenditure = P + I + G + (Exp. – Imp.)

(Gross investment - depreciation = net investment).

When calculating GDP by income, all income received by residents of the country from production (wages, rent, interest, profits) is summed up, as well as two components that are not income: depreciation charges and indirect business taxes.

GDP by income = salary + rent + dividends + interest + depreciation + indirect taxes

Profit for calculating GDP includes: income tax, retained earnings and dividends.

Personal income = salary + rent + dividends + interest

Personal disposable income = personal income – individual taxes + transfers

Net national product = GNP - depreciation

National income = net national product – indirect taxes

Task. Based on data characterizing the state’s economy (in trillion rubles), calculate the value of GDP based on income and expenses:

GDP = 825 + 224 + (302 – 131) + (422 – 410) = 1232

GNP = GDP + NFA = 1232 + 15 = 1247

NNP = GNP – (gross inv. – net inv.) = 1247 – 26 = 1221

ND = ChNP – indirect taxes = 1221 – 107 = 1114

3. Nominal GDP(GNP) is calculated in current year prices, and real GDP is calculated in comparable (i.e., constant, basic) prices.

Real GDP = Nominal GDP / Price Index

The best known price index is the GDP deflator.

GDP deflator = Total value of the current period's set of goods in current period prices / Total value of the current period's set of goods in basic prices * 100%

GDP deflator = Nominal GDP / Real GDP * 100%

Task: Suppose that 3 goods are produced and consumed in the economy. Calculate the GDP deflator for 1992.

Answer: GDP deflator = 8 15 + 7 34 + 5 1425 / 8 10 + 7 27 + 5 655 * 100% = 211%

There was an increase in prices in 1992. compared to 1982

Task: The table shows the values ​​of the GDP deflator as of December 31 of the corresponding year.

Year	GDP deflator
0 (basic)	1,00
1	1,15
2	1,25
3	1,33
4	1,40
5	1,50
6	1,64

Answer: The inflation rate is the percentage by which prices change over the year.

Year	Inflation rate (annual)
0 (basic)	Cannot be determined
1	15%
2	8,70%
3	6,40%
4	5,26%
5	7,14%
6	9,33%

1 year: 1.15 – 1.00 / 1.00 * 100% = 15%

Year 2: 1.25 – 1.15 / 1.15 * 100% = 8.70%

Year 3: 1.33 – 1.25 / 1.25 * 100% = 6.40%

Year 4: 1.40 – 1.33 / 1.33 * 100% = 5.26%

Year 5: 1.50 – 1.40 / 1.40 * 100% = 7.14%

Year 6: 1.64 – 1.50 / 1.50 * 100% = 9.33%

GDP deflator (for year 6) = Nominal GDP / Real GDP = 1.64

Which of the following types of income are taken into account when calculating GDP:

a) the pension of a former factory worker;
b) the work of a painter painting his own house;
c) the income of a dentist engaged in private practice;
d) monthly remittances received by the student from home;
f) purchase of 100 shares of Mosenergo

When calculating GDP for a given year, the following are taken into account:

a) the sum of all money received by citizens of the country in a given year;
b) the market value of all final goods and services produced during the year;
c) the amount of state income and expenses;
d) the cost of raw materials and supplies consumed by enterprises in a given year.

Nominal GDP amounted to 1250 billion rubles, and real GDP – 1000 billion rubles. Then the GDP deflator index is equal to:

a) 25%;
b) 80%
c) 125%
d) 225%

Homework:

Solve the problem: “Nominal GDP in 1994 (base) amounted to 400 billion rubles. and in 1995 – 440 billion rubles. Index – GDP deflator 1995 was equal to 125%. How did real GDP in 1995 change compared to real GDP in 1994?

1. According to the conditions of the problem, 1994 is the base year, which means that nominal and real GDP for it coincide, i.e. real GDP 1994 equal to 400 billion rubles.
2. Real GDP 1995 can be found by dividing nominal GDP by the index - the 1995 GDP deflator:
3. Real GDP 1995 = 440 billion rubles. / 125% * 100% = 352 billion rubles.

Real GDP has decreased compared to 1994.

47. Gross domestic product

To characterize economic activity in a country for a certain period, a system of national accounts is used, which includes a number of indicators that in one way or another characterize the processes of production, distribution and consumption of products and services. The main one among such indicators is GDP(GDP – Gross Domestic Product) - gross national product, defined as the market value of the total volume of products produced in the country for the year. When calculating the gross domestic product, it is necessary to exclude the value of products that go through several production stages during the year and are therefore sold and bought more than once during this time. Thus, the so-called "double counting" In addition, non-productive transactions are excluded from the gross national product indicator:

Financial transactions of 3 types:

government transfer payments (pensions, benefits, scholarships, etc.); private transfer payments (for example, gifts, philanthropy, donations, alms); transactions with securities (purchase and sale of securities does not bring a real increase in output);

Sales of used items (used and “second hand” products were already taken into account when calculating GDP in previous years).

household expenditure on durable consumer goods; expenses for current consumption goods; consumer spending on services;

purchases of machinery, equipment and equipment; construction costs; changes in inventories;

GDP=C + Ig + G + Xn,

Where C (consume) is personal consumer spending; I g (gross private domestic investment) - gross private domestic investment; G (government purchases of goods and services) - government purchases of goods and services; X n (net export) - net export. At the same time, gross private domestic investment is equal to the sum of net investment and depreciation:

Where I n (net investment) – net investment; d (depretiation) is depreciation, and net exports are equal to the difference between exports and imports:

Where X – export; M – import. When calculating gross domestic product based on income the following indicators are taken into account:

depreciation deductions; indirect taxes on business - sales tax, excise taxes, property taxes, license fees, customs duties; wage; rent; percent; profit.

GDP deflator=Nominal GDP/Real GDP.

externalities (for example, environmental pollution or traffic congestion); product produced in households (including the labor of housewives); a product produced by public administration institutions.

48. GNP and other macroeconomic indicators

Another important macroeconomic indicator is “ gross national product" - GNP (GNP – Gross National Product), which differs from GDP in that the latter must be added to the balance of foreign economic transactions, including:

balance of exports and imports of goods and services (balance of net factor income); balance of wage transfers by foreign workers (balance of net transfers); balance of transfer of profits from capital exported to other countries.

GNP = GDP + NI + NT,

where NI (net factor income) is net factor income received from abroad;

NT (net transfers) – net transfers from abroad.

Depending on the sign of the balance on foreign economic transactions, GDP may be greater or less than GNP. In addition to the gross national product and gross domestic product, the system of national accounts includes the following important indicators: net domestic product, national income, personal income, personal income after taxes. Net domestic product(NDP - Net Domestic Product) is equal to the gross national product minus the amount of depreciation charges. National income(NI - National Income) is net domestic product minus indirect business taxes. Personal income(PI - Personal Income) is calculated as follows - transfer payments are added to national income and subtracted:

social insurance contributions; corporate income taxes; retained earnings of corporations.

enterprises producing products and services; subsidiary farms; persons of liberal professions (artists, poets, writers, lawyers, actors, employees of private meat packing plants on an artel basis); bureaucrats and managers; banks and stock exchanges; non-profit organizations (charitable foundations, religious organizations, sports federations, clubs, political parties, cooperatives); army, air force and navy; servants.

49. Distribution, redistribution and differentiation of income

source and direction of income flow to individuals; equality or difference in disposable income between individuals or population groups.

Egalitarian - the entire population receives equal income (“equalization”, “Sharikov’s principle”, after the name of the character in the story by M. A. Bulgakov, who proposed dividing everything); Socialist - “from each according to his ability, to each according to his work”; Communist - “from each according to his ability, to each according to his needs.” Utilitarian - income is distributed in accordance with the needs of each member of society (in accordance with the various utility functions of each individual); Traditional – distribution is carried out in accordance with the traditions and customs of a given community. Competitive - the created product is distributed as a result of competition.

a change in the distribution of income towards the transfer of part of the income from one group of the population to another or from one individual to another; a way to reduce unevenness in income distribution, or, which is also possible, to increase it.

Fig. 1 Lorenz curve The percentage groups of the population are plotted on the ordinate axis, and the percentage shares of income received by these groups are plotted on the abscissa axis. In the case of an even (egalitarian) distribution of income (20% of the population receives 20% of income, 40% of the population receives 40% of income), the Lorenz curve would look like a dotted bisector (OX) on the graph. A measure of income differentiation related to the Lorenz curve is Gini coefficient, calculated as the ratio of the area limited by the Lorentz curve to the area of ​​the triangle OXY. Under conditions of uniform income distribution, the Gini coefficient is zero. In addition, to study income differentiation the following are used:

decile coefficient (the ratio of the mass of income of the most affluent group of the 10% group of the population to the mass of income of the least affluent 10% group); quintile coefficient (ratio of income of the corresponding 20% ​​groups); quartile ratio (ratio of income of the corresponding 25% groups);

50. Propensity to consume and save

Y= C+ S,

Where C is consumption; Y – national income. Typically, the theory of propensity to consume and save is considered within the framework of the macroeconomic section of economics, which is not entirely true, since this problem needs to be studied and is also relevant at the micro level. Under average propensity to consume refers to the ratio of the portion of income spent on consumption to total income:

Where APC is the average propensity to consume; C – consumption. The part of the increase in income that goes towards consumption is called marginal propensity to consume and is calculated by the formula:

Where MPC is the marginal propensity to consume; ΔС – changes in consumption; ΔY – changes in national income. The average and marginal propensity to save are calculated similarly. Average propensity to save equal to the ratio of the saved part of national income to the amount of national income:

where APS is the average propensity to save;

C – savings.

Where MPS is the marginal propensity to save;

ΔS – changes in savings.

The relationship between indicators of the marginal propensity to save and consume can be expressed as the following formula:

The level of consumption and savings is influenced by a number of factors not related to income:

wealth - the more savings accumulated in the previous period, the greater the amount of current consumption and the less the amount of savings; Price level – an increase in the price level leads to a decrease in consumption; Expectations of rising prices lead to an increase in current consumption, expectations of lower prices lead to the opposite results; Debt - usually leads to a reduction in consumption and an increase in the saved portion of income; Taxation – an increase in taxes leads to a reduction in both consumption and savings.

51. Investments and multiplier

Investments (or capital investments) represent the expenditure of monetary resources aimed at the reproduction of fixed capital. The source of investment is household savings, as well as savings made by enterprises and organizations. Investments can be classified into the following forms:

real (investments in physical and human capital) and financial (costs of acquiring financial capital); domestic and foreign; direct (investments made by entities owning more than 10% of the company's shares) and portfolio (investments made by entities owning less than 10% of the company's shares);

Conservative portfolio (involves investing in low-income but stable objects); Income portfolio (investments are made in objects that are guaranteed to generate high income); Risk portfolio (its formation is associated with investing in objects that bring the greatest, but not guaranteed, income).

indefinite life of capital; irregularity of innovations; uncertain profit levels; variability of expectations regarding profit volumes.

ΔY2= ΔI × k,

consumer spending; government procurement of goods and services; net exports.

52. Causes of economic cycles

The peculiarity of a market economy, manifested in the tendency to repeat economic phenomena, was noticed by economists in the 1st half of the 19th century. A number of crises of overproduction in the 19th century (1815, 1825, 1836-1839, 1848-1849, 1857, 1866) led to the formation of a number of concepts of cyclical economic development. Among the authors who worked in the field of studying cycles and crises one can find C. de Sismondi, T. Tooke, Lord Overstone, W. S. Jevons, J. Schumpeter, M.I. Tugan-Baranovsky, N.D. Kondratiev, K. Juglar, A. Spiethof, D. Robertson and many others. Crisis phenomena were also observed in the 17th century, but at that time economists were not very interested in this problem: “no one made a clear distinction between periodic crises and the influence of wars and other external disturbances of the economic process 19. In an attempt to identify the reasons for the constant repetition of crisis phenomena and periods of prosperity, scientists turned to the analysis of such phenomena as an increase or decrease in demand, the development of new mineral deposits, technological innovations, etc. As a result, the main reasons for the cyclical nature of economic development were clarified. So, the causes of the business cycle can be divided into external and internal. TO external factors relate:

Wars and other political upheavals; Development of new territories and population migration; Discovery of large mineral deposits; Scientific discoveries.

Fluctuations in the volume of personal consumption; Reduction or increase in investment volumes; State regulation of the economy; Service life of fixed capital.

53. Phases of the business cycle

The dynamics of the economic cycle, highlighting the phases of the cycle, can be graphically depicted as follows (see Fig. 1).
Fig. 1 Phases of the economic cycle Designations on the graph: a-crisis, b – depression, c- recovery, d – recovery, t- time. Crisis phase accompanied by an overproduction of goods, an increase in the rate of loan interest, a decrease in stock prices, a fall in prices and profit margins, mass unemployment, the ruin of industrial enterprises and banks, and a reduction in production. During depression The fall in production volumes and prices stops, and the interest rate begins to decline. Revival phase characterized by an increase in production rates and a slow increase in prices. There is a demand for industrial goods. During lifting phases Production volumes increase sharply, fixed capital is renewed, prices and incomes rise, unemployment is reduced to the natural level. The English researcher Lord Overston identified the following phases in the structure of the cycle: rest; improvement; increased trust; prosperity; excitation; overheat; convulsions; pressure; stagnation; decline According to the American economist W. K. Mitchell, the following phases are distinguished:

revival; expansion; recession (recession) – slowdown in growth rates; compression.

prosperity (prosperity); recession; depression; recovery.

Q= kt + (sin (2t/T) +,

Where Q is the volume of production; A – amplitude of oscillations; T – oscillation period; t-time; -initial phase of oscillations, k-angular coefficient. The simultaneous presence in economic reality of several types of cycles can lead, according to physical laws, to sharp jumps in the amplitude of fluctuations, to unpredictable crises and economic booms.

Stolyarenko L.D. C 81 Fundamentals of Psychology. Third edition, revised and expanded. Series "Textbooks, teaching aids". Rostov-on-Don: “Phoenix”, 2.

The data obtained when calculating GDP by any method is used to analyze structural and reproductive proportions, the degree of integration of the national economy into the system of world economic relations.

However, real economic life is a more complex phenomenon than even such a synthetic indicator as GDP can embody.

Pure financial flows in macroeconomics include the sum of sales of used items and resales of used goods of current annual production. They do not add or subtract from total final output and for this reason cannot be included in GDP. Calculating GDP “by income” makes it possible to identify:

a) the share of wages in the total income of the population;

b) the ratio of income “for labor” and income “for property”;

c) the share of indirect taxes in GDP.

All methods of calculating GDP are equivalent and should give the same result, since what is spent on purchasing goods and services becomes income for their producer.

In table 3.2 summarizes the calculations of GDP using two methods: “by expenditure” and “by income”. This table is a report of income for the economy as a whole. The left side shows what the economy produced in a year and what the gross receipts from that production were. The right side reflects the structure of the distribution of income created in the process of producing GDP for the year.

3.3. Factors not taken into account when calculating GDP

The data obtained when calculating GDP by any method is used to analyze structural and reproductive proportions, the degree of integration of the national economy into the system of world economic relations. However, real economic life is a more complex phenomenon than even such a synthetic indicator as GDP can embody.

There are macroeconomic flows of income and expenses that are not part of GDP and do not directly affect its value. Thus, in the economy there are a number of products and services that, for specific reasons, do not take a commodity form and do not have a monetary expression and, therefore, cannot be taken into account in the cost of the final product. Examples include the services of the army, law enforcement agencies, and courts.

Pure financial flows in macroeconomics include the sum of sales of used items and resales of used goods of current annual production. They do not add or subtract from total final output and for this reason cannot be included in GDP. Income report for the economy as a whole (figures are notional)

Table 3.2 Receipts: expenditure method Distribution: income method Personal consumption expenditure (C) 4627 Compensation of employees 4005 Gross private domestic investment (I) 1038 Rent 28 Government purchases (G) 1174 Interest 407 Net exports (X) 102 Property income 473 Corporate income tax 203 Dividends 205 Retained corporate earnings 135 Indirect taxes 5b3 Consumption of fixed capital 716 Net income created in the country by foreign factors of production 12 Gross domestic product (5737 Gross domestic product 6737 In the first case, sales are not generated from a product related to current production, but have their source in previously accumulated wealth. Including in the current year's GDP the value of sales of those goods that were produced some years ago will lead to an overestimation of the volume of production in this year. In the second case, transactions of a financial nature are associated with double counting of value .

Purely financial transactions, for example, transactions with securities (purchase and sale of shares and bonds), are not included in GDP. Transactions in the stock market are nothing more than the exchange of paper assets. The funds involved in these transactions are not directly involved in the ongoing production of final goods and services. Only services provided by stock brokers are included in GDP.

With all methods of calculating GDP, so-called non-productive transactions of a financial nature are not included. These include, in particular, transfer payments, of which there are two types:

a) government transfer payments (social security payments, unemployment benefits, scholarships, pensions, interest payments on government debt, etc.). Their main feature is that the recipients of these payments do not make any contribution to ongoing production in response to these payments. Including such payments in GDP would lead to an overestimation of this figure for a given year;

b) private transfer payments (monthly financial assistance received by students from home, one-time gifts from wealthy relatives, scholarships from individuals and organizations, one-time payments from private funds). Such payments are not related to production, but simply represent a transfer of funds from one private individual to another without any connection with the results of production.

GDP is gross domestic product...

Gross domestic product (GDP) is a general measure of output that is equal to the sum of all gross production values ​​of resident institutional entities related to the production process (including taxes, but excluding subsidies for goods/services not included in the cost of the final product). This definition is official according to the Organization for Economic Cooperation and Development (OECD).

The GDP calculation is usually used to measure the level of productivity of an entire country or a specific region. Also, the GDP indicator can show the relative contribution of a particular industrial sector to the total production volume in the country. Determining the relative contribution of economic sectors through the gross domestic product indicator is possible because this indicator reflects value added rather than total revenue. The calculation involves summing up the added value of each firm in the analyzed region (the cost of the final product minus the cost of the products used in production). For example, a firm buys steel to produce a car, thereby creating added value. If, when calculating GDP in this situation, the cost of steel and machinery were summed up, the final figure would be incorrect since the input cost of steel would be calculated twice. Because it is based on value added, GDP increases when firms reduce the use of inputs or other inputs (intermediate consumption) to produce the same amount of output.

A more common way to calculate GDP is to calculate economic growth from year to year (or from quarter to quarter). Changes in the GDP growth rate reflect the success or lack thereof in the economic policies used in the country. Also, by looking at GDP growth, you can determine whether a country’s economy is in a recession.

History of GDP

The concept of GDP was first discovered by Simon Kuznetz in a report to the US Congress in 1934. In this report, Kuznetz cautioned against using GDP as a measure of well-being. After the Bretton Woods Conference in 1944, GDP became the main tool for measuring the size of the economy.

Before the GDP indicator became widely used, the gross national product (GNP-Growth National Product) was used to analyze the performance of the economy. The main difference from GDP is that GNP measures the level of production generated by the citizens of a certain state, both within the territory of that state and abroad. GDP, in turn, measures the level of production of “institutional entities,” that is, entities located within the country. The transition from using GNP to GDP occurred in the mid-90s.

The history of the concept of gross domestic product is divided into stages according to the methods for calculating this indicator. The amount of value added by firms is relatively easy to calculate. It is enough to check the movement of accounts and financial statements. However, the value added by the private sector, financial corporations and the value added generated by intangible assets is a technically difficult quantity to calculate. These types of activities are very significant for developed economies and the international conventions that are the basis for these calculations very often change to comply with industrial changes in the non-material sectors of the economy. In other words, the GDP indicator is a product of complex mathematical calculations and manipulations of data sets to be presented in a form acceptable for further analytical actions.

GDP formula

GDP is the monetary value of all finished goods and services produced in a country during a given period of time. GDP is usually calculated at the end of the financial year. This indicator includes all private and public consumption, government spending, investment and exports less imports.

Standardized GDP formula:

AD=C+I+G+(X-M)

AD (aggregate demand) - total demand

C (consumption)

I (investment)-investment

G (government spending) - government spending

X (export)-export

M (import)-import

This formula shows the main theoretical components of general demand in the economy. Total demand is the sum of all individual purchases made in the economy. In a state of equilibrium, total demand must be equal to total supply - the total volume of production in the country, which is the GDP indicator.

Thus, GDP (Y) includes consumption (C), investments (I), government spending (G) and net exports (X–M).

Y = C + I + G + (X − M)

The following is a description of each of the components of GDP:

1. C (consumption - consumption) is the most significant component in the economy. Consumption consists of private consumption (consumption or costs incurred by final consumers). Private sector consumption is in turn divided into different categories: durable goods, non-durable goods and services. Examples include: rent, household goods, gasoline, medical expenses, but non-consumption is not, for example, the purchase of real estate.
2. I (investments - investment) includes, for example, a company's investment in equipment, but excludes the exchange of existing assets. Examples of investments include building a new mine, purchasing software, or purchasing equipment and machinery for a factory. Expenses of individuals associated with the acquisition of new real estate are also investments. Contrary to popular belief, the term “investment” has nothing to do with the purchase of financial instruments. Purchasing financial products is classified as “saving” rather than an investment. This terminology allows us to avoid duplication of transactions when calculating GDP: if a person buys shares of any company and the company uses the funds received to purchase equipment, then the figure taken into account when calculating GDP will be the cost of purchasing the equipment, but not the cost of the transaction when purchasing shares. The purchase of bonds or shares is only a transfer of funds and is not directly the cost of purchasing products or services.
3. G (government spending- government spending) – this is su mma of government expenditures on final services or products. These include salaries of public sector employees, purchases of weapons for military purposes and any investments made by the government.
4. X (export - exports) represents the gross volume of goods and services supplied abroad. Since the theoretical meaning of the GDP indicator is to measure the level of production generated by domestic producers, it is necessary to take into account the production of goods/services exported to other countries.
5. M (import - imports)— the part of the GDP calculation that represents gross imports. The gross domestic product indicator is reduced by the volume of imports, since goods and services supplied by foreign suppliers are already included in other variables ( C, I, G).

A fully equivalent definition of GDP(Y) is the sum of final consumption expenditure (FCE), gross capital formation (GCF), and net export (X-M).

Y = FCE + GCF+ (X − M)

FCE can in turn be divided into three components: consumption costs by individuals, non-profit organizations and government). The GCF is also divided into five components: non-profit corporations, government, individuals, for-profit organizations and non-profit organizations targeting individuals). The advantage of the second formula is that costs are systematically divided by type of end use (final consumption or capital formation), as well as by the sectors making these expenditures. The first GDP formula mentioned only partially separates the components.

Components C, I And G– these are the costs of final goods and services, the costs of intermediate products are not taken into account (intermediate goods and services are used by companies to produce other products and services during the financial year).

Example of GDP components

C, I, G, And NX(net export): If an individual renovates a hotel to increase the flow of future guests, then this expenditure is considered a private investment, but if the individual owns shares in a construction contractor, then this expenditure is considered a savings. However, when the contractor settles payments with its suppliers, this will be included in GDP.

If the hotel is a private property, the renovation costs will be considered consumption, but if the municipality uses the building as an office for government employees, then this cost will be considered government expenses. spending or G.

If during the reconstruction the component materials were purchased abroad, then these costs will be taken into account in the items C, G, or I(depending on whether the contractor is a private person, a municipality or a legal entity), but after this the “import” item will be increased by the amount of costs, which means a decrease in the final GDP indicator.

If a local manufacturer produces components for a hotel abroad, then this transaction will not apply to C, G, or I, but will be taken into account in the “export” item.

GDP calculation

GDP can be found in three ways, which in theory should give the same result. These methods include: production (value added method), income and cost methods.

The simplest method to calculate is the production method, which sums up the goods and services produced by each type of business activity represented in the economy. The cost method of calculating GDP is based on the principle that the product produced must necessarily be purchased by someone, thus the cost of the final product must be equal to the total costs incurred by citizens of the country being analyzed. The income approach, in turn, is based on the assumption that the income of production factors (producers) must be equal to the cost of production. Thus, using this approach, GDP is calculated by adding the income of all producers.

Nominal and real GDP

Gross domestic product can be of two types. Nominal GDP shows the total value of all goods and services produced in the country during the year, without taking into account their rise in price (inflation) over this period. A more useful type of gross domestic product indicator for economic analysis is real GDP. Real GDP is the measure of goods and services produced in a country over a year, taking into account the annual inflation rate. For example, if the growth of nominal gross product is 4%, and the inflation rate is 2%, then the real GDP indicator will be 2% (4% - 2% = 2%).

Investocks explains "GDP-Gross Domestic Product"

The standard measure of calculation is GDP growth, which is measured as a percentage (the increase in the monetary value of goods and services produced). GDP is usually used as an indicator of the economic condition of a country, and also to measure the level of economic development of a state. Often the GDP indicator is criticized because the calculations do not take into account the shadow economy - transactions that, for one reason or another, are not brought to the attention of the government. Another disadvantage of GDP is the fact that this indicator does not measure material well-being, but serves as a measure of productivity in a country.

Thus, gross domestic product is an indicator of the overall level of production. Often, analysts use GDP growth, which is calculated through changes in the annual output of the economy (gross domestic product).