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GDP Calculator

The GDP (gross domestic product) can be calculated using either the expenditure approach or the resource cost-income approach below. If any clarification on the terminology or inputs is necessary, refer to the information section below the calculators.

Expenditure Approach

Using this approach:

GDP = personal consumption + gross investment + government consumption + net exports of goods and services
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Personal Consumption
Gross Investment
Government Consumption
Exports
Imports

Resource Cost-Income Approach

Using this approach:

GNP = employee compensation + proprietors' income + rental income + corporate profits + interest income
GDP = GNP + indirect business taxes + depreciation + net income of foreigners* * net income of foreigners refers to the income that domestic citizens earn abroad subtracted from the income foreigners earn domestically.
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Employee Compensation
Proprietors' Income
Rental Income
Corporate Profits
Interest Income
Indirect Business Taxes
Depreciation
Net Income of Foreigners*

Understanding Gross Domestic Product (GDP)

Gross domestic product (GDP) is defined by the Organisation for Economic Co-operation and Development (OECD) as "an aggregate measure of production equal to the sum of the gross values added of all resident and institutional units engaged in production." More simply, it can be defined as a monetary measure of the market value of final goods produced over a period of time, typically quarterly or yearly, that is often used to determine the economic performance of a region or country.

Generally, growth of more than two percent indicates significant prosperous activity in the economy. On the other hand, two consecutive three-month periods of contraction may indicate that an economy is in a recession.

Measuring GDP

According to the International Monetary Fund, not all productive activity is included in estimates of GDP. Unpaid work (such as that performed at home or by volunteers) and black-market activities are not included because they are difficult to measure and cannot easily be verified. Thus, a baker that bakes a loaf of bread for a customer would contribute to GDP, but would not do so if he baked that same loaf for his family (but the ingredients he originally purchased would).

GDP can be measured in three main ways:

  • Production approach: This is the gross value of the goods and services added by all sectors of the economy (agriculture, manufacturing, energy, construction, service sector, government). In each sector, gross value added = gross value of output - value of intermediate consumption. One major drawback is the difficulty of differentiating between intermediate and final goods.
  • Resource cost-income approach: Consists of the addition of the value of profit and wages, as well as indirect business taxes, depreciation, and the net income of foreigners.
  • Spending (Expenditure) approach: This is the value of the goods and services purchased by households and the government, including investment in machinery and buildings. It also includes the value of exports reduced by the total value of imports.

The Expenditure Approach Components

GDP = Personal Consumption + Gross Investment + Government Consumption + Net Exports

  • Personal consumption: Typically the largest GDP component. It is comprised of durable goods, nondurable goods, and services (e.g., food, rent, gasoline, medical expenses). It does not include the purchase of new housing.
  • Gross investment: Business investment in equipment and structures. For example, the construction of a new factory. The purchase of financial products (like stocks) is classified as "saving" rather than investment.
  • Government consumption: Sum spent by the government on final goods and services (salaries, weapon purchases, infrastructure). It does not include transfer payments like social security or unemployment benefits.
  • Net exports: Gross exports minus gross imports.

The Resource Cost-Income Approach Components

GNP = Employee Compensation + Proprietors' Income + Rental Income + Corporate Profits + Interest Income
GDP = GNP + Indirect Business Taxes + Depreciation + Net Income of Foreigners

  • GNP (Gross National Product): The market value of all products and services produced in a year through the labor and property supplied by the country's citizens.
  • Employee compensation: Total amount paid to employees (wages, salaries, employer contributions to social security).
  • Proprietors' income: Income received by non-corporate businesses (sole proprietorships and partnerships).
  • Rental income: Income received by property owners (excludes rent paid to corporate real estate companies).
  • Corporate profits: A corporation's income, regardless of whether it is paid to stockholders or reinvested.
  • Interest income: Property income that owners of financial assets receive in return for their investment (deposits, debt securities, loans).
  • Indirect business taxes: General sales taxes, business property taxes, license fees, etc. (does not include subsidies).
  • Depreciation: Also referred to as the capital consumption allowance. Measures the amount a country must spend to maintain, rather than increase, its productivity.
  • Net income of foreigners: Income that domestic citizens earn abroad subtracted from the income a foreigner earns domestically.

GDP vs. Purchasing Power Parity (PPP)

Typically, nominal GDP estimates are used to compare economic size between regions and countries. However, nominal GDP does not take factors such as cost of living into account, and fluctuations in exchange rates can result in significant distortions.

As such, when comparing differences in living standards between nations, GDP per capita at Purchasing Power Parity (PPP) is a better indicator than nominal GDP. PPP estimates what the exchange rate between two countries would need to be in order for the exchange to be on par with the purchasing power of the two different currencies. Because it accounts for differences in the cost of living, GDP (PPP) per capita is often much more representative of the actual standard of living.