GDP calculation

WHAT IS GDP?
 It is the aggregate value of all goods and services produced in a country during a
period of time. Domestic means that only goods and services produced within the
country would be taken into account while claculating the GDP
 HOW GDP IS CONSTRUCTED
o Supply/production side:
 Whole economy is classified into water tight compartments and
then we estimate value of output and corresponding value of input
of raw materials and services used for production. Total value of
output minus total value of input gives supply side GDP
o Income side:
 Income generated during production of goods is distributed
between capital and labour ie between people who own the capital
and people who put in their labour
o Demand side:
 Income generated at production stage will be spent taking the
form of final expenditure
 These expenditures can be private final consumption expenditure
and gov final consumption expenditure
 PFCE: household expenditure on all goods and services except
land and buildings
 GFCE:Amount govt pays to its employees
 Remaining would be gross fixed capital formation
 All three sets differ coz of variation in the levy of taxes on different goods
 Supply side GDP gives the current position of industries
 Demand side gives overall demand picture