Summary EKN 120: CHAPTER 12 (MEASURING DOMESTIC OUTPUT AND NATIONAL INCOME)

ECONOMICS 120
CHAPTER 12: MEASURING DOMESTIC
OUTPUT AND NATIONAL INCOME
GROSS DOMESTIC PRODUCT
There are two ways to calculate the GDP of a country:

METHOD 1: EXPENDITURE APPROACH (4 COMPONENTS)

GDP = Consumption by households (Related to individuals) (C) + Gross Private Investment (I) + Government
Purchases (Government related) (G) + Net Exports (Related to global trade) (Xn)

GDP = C + I + G + Xn

METHOD 2: INCOME APPROACH (6 COMPONENTS)

GDP = Compensation of employees (Wages related to individuals) (W) + Net Operating Surplus (O) + Taxes on
products and imports (Government related) (G) + Consumption of Fixed Capital (Related to corporate
investments) (C) - Net Foreign Income (Related to global trade) (F) + Statistical Discrepancy (S)

GDP = W + O + G + C - F + S

NET DOMESTIC PRODUCT
NDP = Gross Domestic Product - Consumption of Fixed Capital (C)

NDP = GDP - C

GROSS NATIONAL INCOME
There are two ways to calculate the GNI of a country:

METHOD 1: GDP APPROACH

GNI = Gross Domestic Product (GDP) + Net Foreign Income (Related to global trade) (F) + Statistical
Discrepancy (S) - Depreciation (D)

GNI = GDP + F - S - D

NI = Net Domestic Product + Net Foreign Income (Related to global trade) (F) - Statistical Discrepancy (S)

NI = NDP + F - S