Economics with Land Reform

and Taxation

GNP and GDPGroup 6

Presented by:Arvin Dominic Dela CruzJerrie Lloyd PeñalesJohn Lorence PeñalesJoshua Bajana

Presentation Outline

1. What does GDP stands for?2. Definition of GDP3. How do we measure GDP4. Calculating GDP: The Expenditure Approach5. Formula of GDP using Expenditure approach6. Calculating GDP: The Income Approach

What does GDP stands for?

ross

omestic

roduct

The total value of output of goods and services produced within an economy in a given period of time

Definition of GDP

1. Expenditure approach

2. Income approach

How do we measure GDP

3. Output/ Product approach

The Expenditure approach totals annual expenditures on four categories of final goods or services:

1. Consumer goods and services

2. Business goods and services

3. Government goods and services

4. Net exports or imports of goods or services.

Calculating GDP:

The Expenditure Approach

Expenditures= C + I + G + (X – M)

• Consumption (C)

• Investment (I)

• Government spending

(G)

• Net Exports (X-M)

• Exports (X)

• Imports (M)

Formula of GDP using

Expenditure approach

The income approach calculates GDP by adding up all the incomes in the economy.

Formula for GDP (Income approach)

GDP = R + I + P + SA + W

R : rentsI : interestsP : profitsSA : statistical adj.W : wages.

Calculating GDP:

The Income Approach

1. Intermediate goods

What are excluded in GDP?Example of Intermediate Goods:• Bricks and cement used in

the construction of house• Steel used in production of

cars• Wood used in furniture like

sofa, dining table and so on.• Glass used for making

spectacles• Vegetables used by

restaurant owner• Gold and silver used for

making ornaments• Cotton used for making

clothes

1. Intermediate goods

2. Transfer payments

What are excluded in GDP?

Examples of certain transfer payments include • welfare (financial aid)• social security• government making

subsidies for certain businesses (firms)

1. Intermediate goods

2. Transfer payments3. Home Production

What are excluded in GDP?

1. Intermediate goods2. Transfer payments3. Home Production4. Pollution/environmental damage

1. Illegal Goods

What are excluded in GDP?

1. Intermediate goods

2. Transfer payments3. Home Production4. Pollution/environm

ental damage5. Illegal Goods

What are excluded in GDP?

Smuggled Goods

Example:Fake / Counterfeit

Products

What does GDP indicate?

GDP is important because it gives an indication of how successfully society is addressing the scarcity problem.

A larger gross domestic product, there are more goods and services that can be used to satisfy unlimited wants and needs.

• Nominal GDP is GDP measured in current prices. It does not account for price level increases from year to year.

• Real GDP is GDP expressed in constant, or unchanging, peso / dollars.

Nominal GDP Adjust for Inflation Real GDP

• Nominal GDP is GDP which has NOT been adjusted for Inflation.

• Real GDP is GDP which has been adjusted for Inflation

Nominal and Real GDP:

Nominal GDP can grow because of three reasons:

Formula of Nominal GDP

1. Output (q) rises and prices remain unchanged

2. Prices (p) rise and output remains unchanged

3. Both output and prices rise

Nominal GDP = (P x Q)Where:• Output (q)• Prices (p)

• The formula for real GDP is nominal GDP divided by the deflator,

or

• R = N/D

• For example, if prices rose 2.5% since the base year, the deflator is 1.025. If the nominal GDP were 10 million, the real GDP would be 976,000 or 10,000,000/1.025 = 976,000

Formula of Real GDP

The GDP Deflator

News Related about GDP

Philippines GDP

GDP to hit 5.6% in 2015– HSBC

by Bianca Cuaresma - January 9, 2015

The British-owned financial-services giant HSBC ruled out growth,

measured as the gross domestic product (GDP), averaging 7

percent or better for the Philippines this year, saying that the

government’s reluctance to spend in tandem with so-called

institutional bottlenecks weigh heavily on the country’s appeal as

investment destination.

The country’s overall economy may grow at a faster pace this year

with the government likely to hike annual spending amidst nearing

presidential elections in 2016.

In its forecast, listed firm First Metro Investments Corp. (FMIC)

forecast that the Philippines’ Gross Domestic Product (GDP) may

expand to 7 percent to 7.5 percent in 2015.

Home » Business » Business News » FMIC sees 7.5% GDP growthFMIC sees 7.5% GDP growth

by Madelaine B. Miraflor

January 7, 2015

DBCC keeps 2015 GDP target, cuts 2016 growth forecast to 7-8%

By , DANESSA O. RIVERA, GMA News January 7, 2015 5:40pm

Prompted by expectations the Philippines economy will miss the government target for 2014, the Development Budget Coordinating Committee (DBCC) cut the growth projection for 2016, the Budget chief said Wednesday.

The committee, headed by the Budget secretary, however, kept the 7 to 8 percent target in 2015.

ross

ational

roduct

What does GNP stands for?

The total value of final goods

and services produced during

a given period by the citizens

of a country.

Definition of GNP

How do we compute GNP

GNP is calculated by adding the value of expenditure on final goods and services produced.

GNP can be solved using the formula:

GNP = GDP + Net factor income from abroad

(difference between income earned in foreign countries by residents of a country and income earned by foreign nationals domestically).

1. Depreciation of capital results in a loss of income to capital owners, so the amount of depreciation is subtracted from GNP.

2. Indirect business taxes reduce income to businesses, so the amount of these taxes is subtracted from GNP.

How do we measure GNP

GNP is one measure of national income, but a more precise measure of national income is GNP adjusted for following:

GNP helps to measure the contribution of residents of a country to the flow of goods and services within and outside the national territory.

What does GNP indicate?

Similar to that of GDP (household work and illegal goods/services, etc.)

What are excluded in GNP?

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Quiz: Enumeration

1. What does the GNP stands for?2. What does the GDP stands for?3. Two approaches to measure GDP?4. Four categories of Expenditure?5. What is the formula for GDP deflator? (2 pts.)