Post 11: Caclulating GDP

The basic formula for calculating the GDP is:

Ingredients:

Calculate

·         C - Consumer Spending

·         I - Investment made by industry

·         E - excess of exports over imports

·         G - government spending

Add them all together to = Y - the Gross Domestic Product (GDP)

Rules:

1)    Final Goods - If a log was made into timber which was made into a chair, Only the chair will be counted in the GDP.

2)    Imputed Values - Logical or implicit value that is not recorded in any accounts.

3.) Market Price- a security’s last reported sale price (if on an exchange) or its current bid and ask prices (if over-the-counter); i.e. the prices as determined dynamically by buyers and sellers in an open market.