Ways To Measure Gdp

Submitted By eddiegonzalesjr
Words: 353
Pages: 2

The main reason we seek to measure the economy is to check on the well-being of people that are a part of an economy, to see if we are failing or succeeding. Without being able to measure the economy we would not be able to see if what we are doing is succeeding or just making things worse in the short-term and long-term outcome. Since we can measure the economy we can start to analyze trends once enough research has been conducted. There are three ways how we can measure gross domestic product or better known as GDP. Expenditure approach is one way which consists of consumer spending plus investment spending plus government purchases of goods and services plus exports minus the imports, this adds up the market value of all domestic expenditures made on final goods and services in a single year. Another way to calculate GDP is income approach which is wages plus interest plus rent plus profit by adding together all of the wages, profits, rents, and interest income, you determine GDP. The last way to measure GDP is called value added which is value of its sales minus value of its purchases of intermediate goods and services this calculates the profit of sales when subtracting purchased items. Nominal GDP and real GDP are two different calculations but are equality important. Nominal is the output valued at the current prices in an economy while real GDP is the output valued at base-year prices in the economy. Finding the nominal GDP is important because it can