Chapter 2 National Income - Part 2 Concept of GDP and GNP

Economics Class 12
Macroeconomics

#### Note

GDP is of 2 types

• GDP at Market Price
• GDP at Factor Cost

### Transcript

What is GDP? It means Gross Domestic Product It is the total value of all goods and services produced within the Domestic Territory GROSS DOMESTIC PRODUCT Total Value Only Domestic Territory Production of Final Goods and Services only (Without Any deduction of Depreciation) (Not Income from Outside India) (Not Intermdiate Goods) Concept of Domestic Territory Important Points GDP includes Total Production within Domestic Terrritory So it does not include income earned by Indian citizen working abroad It may include income of Foreigners working in India Example 1 Suppose in a country ,there are only 3 persons A,B and C A and B are working in the country while C is working Outside the Country Aggregate Value of Final Goods Produced of A,B and C is 1000,2000,2500 respectively What is GDP of Country? Ans GDP of Country =1000+2000=3000 (We will not take income earned by C as he earns this income working outside the country) Example 2 Suppose in a country ,there are only 3 persons A,B and C A and B are working in the country while C is working Outside the Country Also D is a foreign Citizen working in the country Aggregate Value of Final Goods Produced of A,B, C and D is 1000,2000,2500,4000 respectively What is GDP of Country? Ans GDP of Country = 1000+2000+4000 = 7000 (We will take into account income earned by D also as he is working in the country also) GDP Includes Value of Intermediate Goods Example Suppose in a country ,there are only 3 persons A,B and C,D and E What is GDP in this case Manufacturer Manufacturer Wholeseller Retailer Customer Steel Rs 400 Steel Chair Rs 1000 Steel Chair Rs 1100 Steel Chair Rs 1200 INTERMEDIATE GOODS FINAL GOODS What is GDP? GDP = 1200 GDP is value of Final goods only and not Intermediate Goods Note GDP is of 2 types GDP at Market Price GDP at Factor Cost Different Types of GDP GDP at Market Price GDPMP It includes value of net indirect taxes also GDP at Factor Cost GDPFC It does not include value of net indirect taxes