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Question
What are the methods of calculating Gross Domestic Product? and explain its.
Solution
Methods of calculating Gross Domestic Product or GDP:
- Expenditure Approach – In this method, the GDP is measured by adding the expenditure on all the final goods and services produced in the country during a specified period.
- Income Approach – This method looks at GDP from the perspective of the earnings of the men and women who are involved in producing the goods and services.
- Value-added Approach – In the value-added approach the value added by each intermediate good is summed to estimate the value of the fiscal good. The sum of the value added by all the intermediate goods used in production gives us the total value of the final goods produced in the economy.
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