GDP - Gross Domestic Product- one of the main macroeconomic indicators that characterizes the level economic development states in absolute terms. The value of the indicator is determined by the market (sales) value of all final goods, services produced and used within the country. In this case, only final (directly intended for consumption) products and services are taken into account, and nationality, citizenship, etc. people who produced this product are ignored.
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Only official market transactions are included in the value of GDP, that is, those that have gone through the process of buying and selling and have been officially registered. So GDP does not include: a). labor for oneself (a person builds a house for himself, knits a sweater, repairs an apartment, a master fixes a TV or a car for himself, a hairdresser does his hair); b). labor for free (friendly help to a neighbor to fix a fence, a friend to make repairs, a friend to drive to the airport); v). the value of goods and services produced by the shadow economy. The shadow economy refers to those types of industries and activities that are not officially registered and are not taken into account by national statistical and tax authorities. Thus, the shadow economy includes not only illegal activities (drug business, underground dens and gambling houses), but also completely legal activities, the profit from which is hidden from paying taxes. |
At the level of GDP, only official markets are included so that you went through the process of buying and selling and were officially registered. Tom GDP does not include: a). working on oneself (the person herself will be doing her own work, in "even light, repairing the apartment, the master himself will make a TV set or a car, a car will do his own work); b). work on a free basis (friends to help the susіdovі help parkan, repair a friend, bring a friend to the airport); v). variety of goods and services, generated by the shadow economy. Under the shadow economy, there are certain types of variability and activity, as they are not officially registered and are not insured by national statistical and tax services. Before the shadow economy, in this manner, one can see not only illegal activities (drug business, illicit kublas and grave houses), but also a lot of legal ones, surpluses for those who are willing to pay taxes. |
Not included in the GDP calculation financial transactions, transactions securities, sales in the secondary market (used cars, apartments, houses, clothes, etc.). Financial transactions do not create real value, and the sale of previously used items has already been taken into account earlier in the calculation of previous GDP figures.
How GDP is calculated
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GDP measures total output in monetary terms, i.е. in value form, since otherwise it is impossible to put apples with sheepskin coats, cars, computers, pepsi-cola, etc. Money serves as a measure of the value of all goods, allowing to evaluate, measure the value of all goods and services produced. All products produced by the economy divided into final and intermediate. end products- these are products that go to final consumption and are not intended for further industrial processing or resale. Intermediates goes into the further process of production or resale. As a rule, intermediate products include raw materials, materials, semi-finished products, etc. However, depending on the method of use, the same product can be both an intermediate product and a final product. So, for example, the meat bought by a housewife for borscht is the final product, as it went into final consumption, and the meat bought by the McDonald's restaurant is intermediate, as it will be processed and invested in a cheeseburger, which will be in in this case, the end product. All resales (sales of used items) are also not included in GDP because their value has already been taken into account once at the time of their first purchase by the final consumer. Only the value of final products is included in GDP in order to avoid double counting. The fact is that, for example, the cost of a car includes the cost of iron (from which steel is made), steel (from which they are rolled), etc. Therefore, the calculation of the cost of final products is based on value added. To avoid double counting, only value added equal to the value of the final product is included in GDP. Added value is the difference between total sales revenue and the cost of intermediate products – i.e. the cost of raw materials and materials that each manufacturer (firm) buys from other firms. Anything that is not a product or service is not included in GDP. Those payments that are not made in exchange for goods and services not taken into account in the value of GDP. Such payments include transfer payments and unproductive (financial) transactions. Transfer payments are divided into private and public and represent gratuitous income. TO private transfers include, first of all, payments that parents make to their children: gifts that relatives make to each other, etc. Government transfers are payments that the state makes to households through the social security system and firms in the form of subsidies. Transfers are not included in the value of GDP:
Financial transactions include the purchase and sale of securities on the stock market. Since there is no payment for either goods or services behind a security, these transactions do not change the value of GDP and are the result of a redistribution of funds between economic agents. At the same time, it should be borne in mind that the payment of income on securities is necessarily included in the value of GDP, since it is a payment for an economic resource, i.e. factor income, part of the national income. All goods produced in previous years, decades, eras are not taken into account when calculating GDP, since they have already been taken into account in the value of GDP of the corresponding years. Therefore, to avoid double counting, only the value of a given year's output is included in GDP. |
GDP is dying sukupny obsjag vrobnitstvu penny virazі, then vartіsnіy formі, oskіlki іnakshe it's impossible to put an apple with sheepskin coats, cars, comp "yuters, pepsi - cola, etc. Pennies serve as vimіruvachі vartostі all commodities, scho allow appraisal of comrades, pornography and services All products that are shaped by the economy, divide into kіntseva i promіzhna. Kіntseva products- all products, as if they were on sale in the UK, are not recognized for further processing or resale. Industrial products go to a further process of virobnitstva or resales. As a rule, syrovin, materials, finished products, etc. are added to industrial products. However, in the case of staleness in the way of winning, one and the same product can be an intermediate product, and end. So, for example, m "yaso, bought by a housewife for borscht, є kіntsevy product, so it went in kіntsev spozhivannya, and m" yaso, bought by the McDonald's restaurant, - by the middle, so it will be a pіddane relab and invested in a cheeseburger, which will be the ultimate product in this case. All resale (sale of live speeches) is also not included in the GDP, the shards of their art were already once insured at the time of their first purchase by a gentleman. GDP includes only the variety of end products z tim, schob niknuti repeated (podvіyny) rahunki. On the right, in that, for example, the quality of a car includes the quality of the hall (for which steel is spun), steel (for which rolling is taken), etc. That's why the helluva lot of kіntsevoi production is carried out for additional varіstyu. Shchob niknuti re-rahunka, the GDP includes only the added value, which is more expensive than the final product. Dodana varity- the price of the difference between the raw material for sale and the variety of industrial products - that is the variety of syrovin and materials, like leather goods (company) buying from other companies. Everything that is not a commodity but a service, not included in GDP. Ті payments, yakі robyatsya not in exchange for goods and services, don't cheat to the vartosti of GDP. Before such payments, transfer payments and unproductive (financial) payments are made. Transfer payments podіlyayutsya on private states and is a free income. Before private transfers to be seen, in pershu black, to pay, like fathers to give gifts to children, like one to one to give relatives, etc. sovereign transfers- tse vipay, like a power to work for home ownership for the system of social security and for firms from looking for subsidies. Transfers are not included in the variant of GDP:
Prior to financial transactions, the purchase and sale of valuable papers on the stock market are due. Oskіlki for a cіnniy paper is also not varto payment for nі goods, nі services, cі please don’t change the value of GDP і є as a result of rerozpodіlu koshtіv mіzh economic agents. With all the help of mothers in the country, that the payment of income on valuable papers is clearly included in the variance of GDP, the chips are the payment for an economical resource, that is a factor income, a part of the national income. All commodities that were destroyed in previous years, ten years, epochs are not insured at the feast of GDP, stinks of stench were already insured at the vartost of GDP in recent years. To that, in order to get rid of the underbelly of the rahunka, the GDP includes only the varity of the commitment to the given fate. |
Nominal and real GDP
Since the economy of any state is subject to inflationary processes, then after calculating nominal GDP(in current prices) calculate real GDP(in comparable prices). Comparison of real GDP for the current and past (or any other) period makes it possible to assess the real growth of the state's economy. In this case, the base (earlier) period is taken as 100%, and the value of GDP in the period under evaluation is already determined relative to it.
For comparison, the GDP of different countries is converted at the exchange rate. However, in some cases, purchasing power parity conversions are used to avoid serious distortions in estimating the GDP of countries with non-convertible currencies. Purchasing power parity is a calculation method that takes into account the number of monetary units of one country in relation to the number of monetary units of another country, at which the same set of goods and services can be purchased.
used to calculate GDP three main methods:
- value added method
- Expenditure method of calculating GDP (production method)
- Method of calculating GDP by income (distributive method)
Each of these methods has its own advantages and disadvantages.
value added method uses the value of goods and services intended for consumption in the calculation of GDP. That is, those that are finally consumed and are not further used in production processes for processing, processing, assembly, etc. In this case, value added is the total amount of market prices for the products of business entities, from which it is necessary to subtract the cost of consumed raw materials and materials received from suppliers. The total sum of such values will give GDP, which represents the market estimate of the total value of all goods and services produced by the state's economy for the period.
Method of calculating GDP by expenditure(also often referred to as the production method) defines GDP by calculating the sum of all expenditures of economic entities on the acquisition of final products and services. To calculate GDP using this method, you need to sum:
- consumer spending of the population (C)
- gross private investment in the national economy
- public procurement of goods and services
- net exports (the absolute difference between a country's exports and imports)
GDP = C + Ig + G + NX
Where:
C - consumer spending of the population
Ig - gross private investment in the national economy
G - public procurement of goods and services
NX - net export
Method of calculating GDP by income(often referred to as the allotment method) is based on the calculation of the amount of income of the owners of business entities. That is, to calculate GDP, the incomes of all business entities operating in the territory of the state are summed up. At the same time, the income of both residents and non-residents is summed up. It also sums up indirect and direct taxes on businesses, depreciation, property income and retained earnings.
Thus, the formula for calculating GDP looks like this:
GDP = W + Q + R + P + T
Where:
W - wages paid by business entities, regardless of the presence (absence) of citizenship
Q - social security contributions and other obligatory payments
R - gross profit of business entities
P - gross mixed income
T - taxes on production and imports (government subsidies are deducted from this amount, if any).
To assess the performance of economies, comparing labor productivity levels and living standards, macroeconomic indicators lead to the indicator "per capita". At the same time, the calculation GDP per capita allows you to compare labor productivity in countries with different territories and populations. That is, the calculated level of GDP is divided by the number of people in this territory. However, since accurate data only exist for the citizens of a given country, the Gross National Product (GNP) per capita is usually used. It allows you to assess the standard of living in a particular country.
Gross domestic product is the total cost of final goods and services, produced in the territory of this country, regardless of whether they are owned by residents of this country or are the property of foreigners.
Gross domestic product is used to characterize the results of production, the level of economic development and pace.
Gross domestic product measures the market value of all final goods and services produced within a country during a year, so it is monetary indicator.
An important condition for calculating GDP is avoidance of double counting. The production of any product goes through several stages: first, raw materials are converted into intermediate goods and then sold to another company for the production of finished products. GDP does not take into account the value of goods in intermediate stages and only takes into account the market value of the final product. This is done because the cost of the final product already includes intermediate stages and goods. If we take into account the cost of goods at intermediate stages, then there will be re-count overstating the real size of GDP.
To improve the understanding of the added value, we solve the problemThe chemical plant sells laundry detergent for 500,000 rubles a year to a public service enterprise, and a private boiler house provides electricity and hot water (the annual cost of services is 600,000 rubles a year). The consumer services enterprise provides services to local residents for 2 million rubles a year. By how much does GDP increase as a result?
Answer: For 2 million rubles, because intermediate consumption is taken into account in the composition of the final product (consumer service).
The difference between GNP and GDP is as follows:- Gross domestic product is calculated on a territorial basis. It takes into account the cost of production, regardless of the nationality of enterprises located in the territory of a given country.
- Gross national product is the value of the national economy, regardless of the location of the national enterprise.
That is, GDP takes into account all goods and services produced in the territory of a given country, and GNP takes into account all goods and services produced by national enterprises, regardless of the place of production.
GDP = - (difference between factor income from abroad and factor income received by foreign investors in the country).
Gross domestic product is the main indicator of economic activity in the country. However, it does not give a true picture of the quality of life of the population and the level of well-being. To more accurately assess the well-being of the population, countries use indicators such as net national income and national income.
Articles of GDP
| By expenses | By income |
Consumer spending, services
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Wage
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The following items are not included:
- Scholarship of a student studying at the budget department of the university - transfer.
- The value of shares sold on the secondary market is a financial transaction.
- Family expenses for the purchase of a used car are not included in the GDP. resale, was previously included in GDP.
- Interest on government bonds received by a private person - interest on government securities.
- Incomes of the shadow business are not included, although they partially try to estimate these incomes indirectly.
- 50 rubles received by the grandson from his grandmother to buy ice cream - transfer
- Purchase of an imported BMW car by a private motor transport enterprise - Household and government final consumption and investment expenditures include the cost of both domestic and imported products (with a plus sign), but the values of the same imported goods are included in the calculation of net exports (with a minus sign) ), so that ultimately the value of imports does not affect GDP.
- Dividends paid at the end of the year to the Russian shareholders of an American corporation located in America are not included in GDP, but are included in GNP (GNI in the modern version of the SNA).
Ambiguous situations
- Sale of crude oil by a Russian oil company to a Russian refinery. If the intermediate consumption value of this oil is simply added to GDP, a double count occurs. Therefore, this value will be taken into account further when the value of the final product produced using this oil is included in GDP, or its elements will be included in GDP when calculating based on the summation of value added.
27: GDP and how to measure it.
The system of national accounts in Russia began to be created in 1991, and it is based on the concept of a market economy, according to which the total output of economic activity includes the production of all goods and services. The SNA takes into account not only material production, but also the service sector. The essence of the SNA is reduced to the formation of a system of generalizing indicators of economic development at various stages of reproduction (Production, primary distribution of income, secondary distribution of income and the use of disposable income for final consumption and accumulation). The systems of national accounts are built on the principle of accounting.
GDP is a measure of the value of final products produced in the territory of a given country over a certain period of time.
Final goods and services are those used for final consumption, accumulation and export. In addition to the final, there are intermediate goods that are fully used in the production process. They should not be taken into account in the calculation of production. In addition, when calculating GDP, they do not take into account:
Operation with securities
Operations for the resale of used items.
State and transfer payments are gratuitous payments by the state to individuals and legal entities
Off-market activities
Zero Sector Operations
Why the term gross? “In the definition of GDP, it means that when calculating GDP, consumption of fixed capital “depreciation” is not deducted from the cost of production.
There are 3 methods to measure GDP:
By value added. The production method sums up the value added at each stage in the production of the final product.
Value added=value of final goods and services-value of intermediate goods and services.
GDP is the sum of all value added.
Added value is the difference between the value of goods and services produced (output) and the value of goods and services fully consumed in the production process (intermediate consumption).
For the economy as a whole, the sum of all value added must be equal to the value of final goods and services.
2) end use method. Or expenses. When calculating GDP by expenditure, household final consumption expenditures, gross investment, net exports, and government spending are summed up. Iq+G+Xn
C– Household spending on durable and current consumption goods, as well as on services, but this does not include spending on the purchase of housing.
I q- business expenses. These are capital investments in fixed production assets. Includes investments in housing construction. Gross investment. I q \u003d I clean + A m
G - Government purchases of goods and services (army, etc.) Transfer payments are not taken into account.
X n is a net export. The difference between exports and imports.
When calculating GDP, it is necessary to take into account all the costs associated with the purchase of all final goods and services produced in the country, including foreign ones, i.e. the country's exports. At the same time, it is necessary to exclude economic agents of the given country from purchases; those goods and services that were produced abroad, i.e. imports.
3) distribution method. By income. The primary incomes of economic entities for a certain period are summed up. GDP is made up of 3 components:
1) The income of the owners of factors of production. This is wages + interest + rent + profit.
2) Depreciation.
3) Indirect taxes. Excises are taxes on income. 10% of the goods. New approach. It also consists of 3 components. 1) Remuneration of employees (salary includes bonuses, surcharges, allowances, employers' contributions to social insurance). 2) Production and import taxes less subsidies. 3) Gross profit and depreciation.
The choice is determined by the presence of a reliable information base.
In addition to GDP, there are other indicators of income and product.
GNI is the current market value of all final goods and services created by factors of production owned by a resident, including those in other countries, that is, the total volume of goods and services, both domestically and abroad.
Indicators of domestic product and national income can be calculated both on a gross and net (excluding depreciation) basis.
NDP (net domestic product) = GDP - Depreciation.
National Income (NI) = NIP - Indirect Taxes. = this is income earned but not received.
National income is all the income of suppliers of factors of production. The total amount of wages, rents, interest and profits.
Personal income (PI) is used in macroeconomic statistics but is not used in the system of national accounts.
National income is earned income, but we don't necessarily get everything we earn.
LD - income received, but not yet used. It is calculated by subtracting from the national income, social security contributions, retained earnings of enterprises, corporations. And with the addition of transfer payments.
Disposable income (disposable personal income) is income after taxes and is equal to personal income minus individual taxes. It shows how much households can actually manage. The proportions in which they are correlated (consumption and savings) predetermine the resource base of capital investments in the country's economy (only the saved part of the RC can be invested).
To define such a concept as GDP, it is absolutely not necessary to use a lot of complex terms and formulations. For this purpose, simple, understandable words are quite suitable. So, let's try to determine what GDP is and why this indicator is needed.
First of all, it should be noted that the term GDP or gross domestic product of a country is used to determine the rate of economic development of any state.
If to speak plain language, then GDP is the total value of goods, works and services that were produced and provided in the territory of one country in a year.
This indicator was first calculated in the 1930s by the economist Simon Kuznets. Later, the specialist received the Nobel Prize.
Today, in the field of economics, two important indicators are used: GDP and GNP. The concepts differ from each other, although they are aimed at determining the economic indicators of the state. When calculating the gross domestic product, financial indicators are taken into account, which do not depend on the nationality of the enterprises involved in the production of products. The most important thing is that the enterprise is located on the territory of the state.
To calculate the domestic national product (GNP), only the products of those production facilities that are considered national are taken into account.
What is GDP?
As we have already noted, the term has a very simple definition - it is the cost of everything that is produced in the state. The calculation of the indicator has a multilevel character and is carried out by special services. It is generally accepted that GDP is expressed in US dollars, however, today, the following options are also used:
- national currency of the country;
- the monetary unit of any state, in accordance with the exchange rate.
The dollar is used to compare the GDP of different countries for rankings and assessing the current economic situation.
What types of GDP exist?
To get a better idea of the indicator, it is worth getting acquainted with its types. So, let's consider this issue in more detail and note that GDP can be:
- real;
- nominal.
Real GDP is an indicator that is used to take into account the growth in production without using its financial side. As a rule, this parameter is expressed in the prices of the year that was taken as the main one in the calculations. For example, to calculate the indicator for the last year, Rosstat used price data for 2011 as a basis.
The advantage of the indicator is that it allows you to determine the increase in the country's trade turnover. Real GDP does not depend on changes in exchange rates and other economic parameters. It is this indicator to draw conclusions about the current state of the economy in the country.
For example, real GDP will allow you to quickly understand if there is a crisis in the country and how difficult the economic situation has already been. For countries whose economies are stable, real and nominal GDP are the same.
The nominal figure is the GDP calculated in current prices. The cost of certain goods is determined at the time of collection and is subsequently used for settlements. When a country experiences an increased inflation rate, GDP may rise, however, such a reaction will be formal and the reason for it will be a real decrease in production capacity.
In fact, nominal GDP serves to reflect the rise or fall in the cost of goods and services within the country, without touching the dynamics of economic development as a whole. Nominal GDP serves as a kind of tool for economists to draw certain conclusions and make forecasts.
An example is the situation of changing the indicator. If, with a constant increase in prices, the level of demand begins to fall, then nominal GDP will also drop significantly.
What is "GDP per capita" and "GDP PPP"?
Economists often refer to the term "GDP per capita". This indicator is used to identify important indicators of the state or in a particular region. Calculating this indicator is very simple using a simple formula:
GDP per capita = total GDP / per number of citizens living in the country.
This parameter is also used to compare economic performance in different countries. In fact, this indicator cannot be considered absolute and accurate, since the data used in the calculation change periodically and are not always real.
PPP is another term that needs to be deciphered. Under this concept, purchasing power parity is encrypted. This indicator is used to compare data in different countries and in different monetary units. In other words, GDP at PPP is the ability of a citizen of one state to purchase goods from another state for the income he has.
When conducting international comparisons, the UN compares about 700 basic goods, 250 investment objects, 15 objects under construction.
Methods for calculating GDP
The classic formula for calculating GDP is quite simple:
GDP = Gross Value Added + Taxes on Products and Imports - Subsidies on Products and Imports, however, other formulas may apply when using certain calculation methods. There are several methods for calculating this indicator. We note the most famous and simple:
- Production method or value added. To calculate GDP, the value added indicator and the market assessment of production on the territory of the state are taken as the basis. The method is production
- Distribution method or by income. To calculate GDP using this method, such types of income are used as: all paid salaries and bonuses to the population, profit from land lease, interest on borrowed funds. Direct taxes and salaries of civil servants are not taken into account.
- End use method or by cost. To calculate the indicator, it is necessary to use the following types of expenditures: consumer, government, investment, net exports.
For this method, a special calculation formula is provided:
C - personal consumer spending;
I - gross investments;
G - public procurement of goods and services;
Xn is net export.
Each method has its own characteristics and subtleties. In our country, all three methods of calculation are used, however, the greatest preference is given to the distribution method.
GDP in the Russian Federation
Every year, the President of the Russian Federation V. Putin convenes a press conference, where he reports on current indicators country's GDP. Last year, such a meeting took place at the end of December, where the President said that in 2016 there was a drop in GDP, however, it was within the normal range and amounted to 0.5-0.6%. If we compare the indicators of 2015, when GDP was 3.7%, we can note that the drop was insignificant. Moreover, in November last year, there was a slight increase in the indicator, which could be the beginning of an increase in the pace of the economy in the state.
Dmitry Medvedev also expressed his opinion on this issue. The Prime Minister confirmed that the country has gone through one of the most difficult periods in its history and today we can say that the state has adapted to the fall in oil and gas prices. According to Medvedev, the recession of the economy was stopped and the GDP indicators were:
- nominal GDP - 1,267 billion US dollars;
- PPP - 3,745 billion US dollars.
As for the level of GDP in 2017, it is worth noting here that already in the first months of the new year, GDP growth was noted, and by the end of the year it amounted to 1.1%.
What is the meaning of GDP for the state?
As we have already noted, GDP is an indicator that includes the total value of all products, goods and services that the state has produced in a year. This parameter for each country has great importance, because they allow you to determine the trends and speed of economic development of the state. GDP is characterized by the following features:
- the indicator is measured in dollars for the possibility of further comparison;
- within the country, data are calculated in national currency;
- the indicator is recalculated annually;
- GDP is formed not only at the expense of public, but also at the expense of private income;
- The indicator fully reflects the stage of the country's economic development.
In order for GDP to be calculated as accurately as possible, it is not enough to take the basic general figures and make calculations. To get a more complete picture of the development of the state, to determine the GDP, namely, to understand which industries are the most profitable, it is worth checking such indicators.
For example, in Russia, the most efficient and profitable are the industries associated with the sale of oil and gas, respectively, the income received from this source plays special role in the formation of GDP.
Conclusion
GDP is a very simple concept that you can talk about in simple words and phrases, without the use of complex terms and concepts. Our article is written so that even people without economic education were able to obtain the desired information without delving into complex formulations and calculations.
The paper provides simple definitions of basic concepts and describes the main methods for calculating GDP, which allow you to get an idea of the most important economic indicator of any state.
11.1 value added method
11.2 Method of calculating GDP by expenditure
11.3 Allocative method of calculating GDP
11.4 Nominal and real GDP
The main macroeconomic indicator for real statistical measurement of production and consumption of the national product is the indicator gross domestic product(GDP). Three main methods are used to calculate GDP:
1) Value added method;
2) cost method;
3) distributive method.
GDP is the monetary value of all final goods and services produced in the national economy in a year.
Gross Regional Product (GRP) region(subject of the Russian Federation) per year.
Gross Local Product (GMP)- the value of final goods and services produced in a certain municipality(urban or rural settlement, urban district or municipal district, as well as in the intra-city territory of a city of federal significance) for the year.
value added method
For a correct calculation of GDP, it is necessary to take into account all goods and services produced in a given year, but without double counting or double counting. That. only final goods and services, consumed within households or firms, and not involved in further production (upholstered furniture, air conditioning), in contrast to intermediate goods (industrial goods) used in a further production process (for example, flour bought by a bakery for baking bread). If intermediate products are included in the GDP, then the appraiser will get inflated GDP estimate. So, the price of flour will be taken into account several times: first, as a result of the flour mill (the price of flour itself), then - in the price of baked bread, then - in the price of packaged bread in a supermarket, etc.
The indicator allows to exclude double counting added value, which represents the difference between firms' sales of their finished products and purchases of materials, tools, fuels, energy, and services from other firms.
Added value - this is the market price of the firm's products, minus the cost of raw materials consumed and materials purchased from suppliers.
GDP = the sum of the value added of all goods produced and services rendered in the country's economy in a year
Method of calculating GDP by expenditure
When calculating according to cost method it is necessary to sum up all the expenses of economic entities for the purchase of final products. When calculating GDP based on spending, or the flow of benefits (this method is also called the production method), the following values are summed up:
1. Consumer spending of the population (C).
2. Gross private investment in the national economy (I g).
3. Public procurement of goods and services (G).
4. Net exports (X n ), which represents the difference between the country's exports and imports.
Thus, the listed expenditures constitute the volume of GDP and show the market value of annual production:
GDP on expenses = C + I g + G + X n
Household spending on personal consumption include spending on durable goods, food, clothing and household items, and various services.
Gross private investment or capital investment is the sum net investment- an increase in the stock of durable capital goods, i.e. buildings and structures, machinery and equipment, inventory and depreciationv during the year. Net investment implies the process of real capital formation, and not the acquisition of financial assets (stocks, bonds, etc.), which are also called investments, but already within the financial sector of the economy.
Public procurement of goods and services- these are the expenses of state institutions and authorities at all levels for the purchase of goods and payment for the services of labor employed in the public sector. This government spending does not include transfer payments, those. gratuitous payments from the state, since they are not a payment for the service provided (for example, state benefits for poverty, unemployment, support for single-parent families, scholarships, pensions, etc.). Since they are not paid in exchange for the provision of any factor of production, they are not treated as factor incomes.
Net export – this is the difference between a country's exports and imports, since most countries are open economies in which the government does not prevent the free movement of goods, capital, labor across national borders.
