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PAYMENT FOR
RESOURCES (1)
HOUSEHOLD
SECTOR
FIRMS
PAYMENT FOR G & S (3)
GOODS & SERVICES (2)
1]
INCOME APPROACH OR METHOD
2]
EXPENDITURE APPROACH
3]
PRODUCTION APPROACH OR METHOD
INCOME APPROACH
• This method measures GDP as the sum of all incomes
earned by the households for use of the factors of
production.
• To calculate GDP by this method, statistics NZ, uses data
collected from
I)
employees - Salaries & Wages
II)
Businesses - Profits
III)
Government - indirect taxes
Under NZSNA, the terms used are as follows:
Compensation of employees (salaries & wages)
plus Gross operating surplus (profits + depreciation)
plus Net indirect taxes (indirect taxes minus subsidies)
=
GDP Income Approach
CALCULATING GDP
USING CIRCULAR FLOW DIAGRAM
CONSUMPTION
EXPENDITURE (C)
HOUSEHOLDS
PRODUCERS
INCOME (Y)
In this simple circular flow diagram, Total Income is equal to consumption
expenditure.
Y=C
FINANCIAL
SECTOR
INVESTMENT (I)
(C)
SAVINGS (S)
HOUSEHOLDS
PRODUCERS
(Y)
In this extended circular flow, GDP equals consumer spending plus savings or
investment
Y = C + I (where I = S)
FINANCIAL
SECTOR
INVESTMENT (I)
(C)
G
SAVINGS (S)
GOVERNMENT
HOUSEHOLDS
PRODUCERS
Tr
T
(Y)
In this circular flow, GDP equals
Y=C+I+G
Where G equals government spending
FINANCIAL
SECTOR
INVESTMENT (I)
(C)
G
GOVERNMENT
HOUSEHOLDS
M
PRODUCERS
Tr
T
X
(Y)
In this circular flow, GDP equals
Y = C + I + G + (X - M)
Where (X - M) is the difference between export
receipts and import payments
OVERSEAS SECTOR
SAVINGS (S)
PRODUCTION OR VALUE ADDED APPROACH
• Calculate the value of goods & services by adding the costs of the
firm involved in Production.
• Statistics NZ does this by collecting via surveys from NZ business.
• The value of the GROSS OUTPUT of each industry is calculated.
• The intermediate consumption (goods) sold to other firms towards
final goods production is also calculated.
• These two figures GROSS minus INTERMEDIATE, gives an
estimate of the Value Added by the industry.
• The value added by each of the industries is summed up and
overall figure of GDP is arrived at.
$50
PRODUCTION
APPROACH
FOR BRICK
MAKING
$150
$100
Extraction of Raw
materials (Clay)
Manufacture of
bricks
Retail of
Bricks