# GDP Calculator

LAST UPDATE: September 24th, 2020

## Definition – What is GDP?

GDP is a measure of all final goods and services produced over a period of time (typically a year, although quarterly and monthly are common).

There are two methods of calculating GDP – the Expenditure Approach (adding up all expenditures in the economy) and the Income Approach (adding up all incomes in the country). The formulas are below.

This method of calculating GDP is often called “Nominal” “Original” or “Historic” GDP. It does not measure changes due to inflation or cost of living, only the actual dollar value transactions (for that see Real GDP).

## Formulas – How to calculate GDP

Expenditure approach: GDP = Consumer spending (C) + Investment (I) + Government spending (G) + Net exports (Nx).

Income approach: GDP = Labor Income (W) + Rental Income (R) + Interest Income (I) + Profits (PR).

### Example

Expenditure approach – Consumer spending is \$4,000,000, investment is \$2,000,000, government spending is \$3,000,000, and net exports are \$6,000,000.

GDP (expenditure approach) = \$4,000,000 + \$2,000,000 + \$3,000,000 + \$6,000,000 = \$15,000,000

Income approach – Labor income is \$2,000,000, rental income is \$8,000,000, interest income is \$4,000,000, profits are \$1,000,000.

GDP (income approach) = \$2,000,000 + \$8,000,000 + \$4,000,000 + \$1,000,000 = \$15,000,000.