Unit 2 - Gross Domestic Product Pt.2

Expenditure Approach:
The expenditure approach consists of adding up the total of government expenses, consumption, net exports and investment that make up the Gross National Expenditure.
 + Formula:
           C       +                      Ig                        +          G         +      Xn          =   GDP
(consumption) (grss private dos. investment)   (govt.spending)  (net exports)

Income Approach:
The income approach and the output approach use the total of consumption, savings and taxation to yield the same results.
 +Formula:
   W    +   R   +    I     +   P     + Statistical Adjustment*  =  GDP
(wage)  (rent) (interest)(profit) 

*Statistical Adjustment included: 
- Indirect business taxes
-Net foreign factor income earned
-Corporation income tax 
-Dividents
-Undistributed corporation profit

Definition:

-Wage: Compensation of employee, salary supplementary, health, insurances, welfare 

-Rents: Tennet to land lord, a least payment by corporation for the use of their space

-Interest: Money paid by private business to suppliers of loan used to purchase capital

-Profit: Corporate income taxes, undistributed corporate profit, dividend