According To The Factor Income Approach Gdp Is The Sum Of
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Gdp is gross domestic product and is an indicator to measure the economic health of a country.
According to the factor income approach gdp is the sum of. This is adjusted to yield net national product nnp gross national product gnp to gdp. The formula to calculate gdp is of three types expenditure approach income approach and production approach. Factor income is most commonly used in macroeconomic analysis helping governments to determine the difference between gross domestic product gdp the total monetary or market value of all the. Gdp calculation using the income approach.
One of the most common ways to measure the size of an economy in other words the aggregate output of a country is by compiling the gross domestic product gdp as defined by the world bank gdp represents the market value of all final goods and services produced within a country s borders during the course of one year. This gives national income ni. The income approach is a way for calculation of gdp equation by total income generated by goods and service where 1. The income approach measures gdp as the sum of the factor incomes generated to the economy.
Expenditure approach in this approach gdp must be calculated by taking the total amount spent on goods and services that have been produced in the economy within a given period of time. B private transfer payments such as an inheritance are included in the gross domestic product gdp. Ni 67 75 150 200 ni 492 gdp ni indirect business taxes depreciation gdp 492 74 36 gdp 602. C if statisticians counted intermediate goods the estimate of gross domestic product gdp would be too high.
Total national income is the sum of all salaries and wages rent interest and profits. According to the income approach gdp can be computed as the sum of the total national income tni sales taxes t depreciation d and net foreign factor income f. D gross domestic product gdp measures the market value of final goods and services produced during a particular time period. Starts with income earned by the factors of production wages interest rent and profits.
1 expenditure approach there are three main groups of expenditure household business and the government.