Gross domestic product
GDP or Gross Domestic Product is the total value of all finished goods and services produced within the U.S on annual basis. Also includes foreign-made goods and services.
There are two ways to calculate GDP: the output approach and the income approach. The output, or expenditures, approach consists of adding together personal consumption expenditures, investment expenditures by businesses, government purchases of goods and services, and expenditures by foreigners. The income approach adds together wages, rents, interest, profits, and statistical adjustments.
So, putting the output approach in to a mathematical equation looks likes this:
- GDP = C + I + G + X, where C is personal consumption, I is business investment, G is government investment, and X is net exports.
The income approach would like this:
- GDP = employee compensation + rents + interest + corporate profits + dividends + retained corporate earnings.