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NSS Exploring Economics 5 (3 Edition) : Revision Notes

This document provides a summary of key concepts related to measuring economic performance, including GDP and GNI. It defines GDP as the total value of production of all resident producing units in an economy within a specified time period. It notes what is excluded from GDP calculations, such as transfers and used goods. It also describes the production and expenditure approaches to calculating GDP. Finally, it defines GNI as the total income earned by an economy's residents from economic activities, which is equal to GDP plus net income from abroad.

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429 views2 pages

NSS Exploring Economics 5 (3 Edition) : Revision Notes

This document provides a summary of key concepts related to measuring economic performance, including GDP and GNI. It defines GDP as the total value of production of all resident producing units in an economy within a specified time period. It notes what is excluded from GDP calculations, such as transfers and used goods. It also describes the production and expenditure approaches to calculating GDP. Finally, it defines GNI as the total income earned by an economy's residents from economic activities, which is equal to GDP plus net income from abroad.

Uploaded by

inke
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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NSS Exploring Economics 5 (3rd Edition)

Revision Notes

Chapter 1 Measurement of economic performance (I) — GDP and GNI

Gross domestic product (GDP)

1. Gross domestic product (GDP) is the total value of production of all resident producing units of
an economy in a specified period (e.g., a quarter or a year).

2. Resident producing units (RPUs) of an economy are production units (they can be individuals or
organisations) which maintain a centre of predominant economic interest in that economic
territory.

They have remained or intend to remain in the economic territory of the economy for at least 12
months (for individuals) or ordinarily operate in the economic territory of the economy (for
organisations).

Items not included in GDP

3. a. Items not involving production (e.g., transfer payments, capital gain, financial assets and
second-hand goods)
b. Items not produced by resident producing units (e.g., imported goods and services)
c. Items not produced during the specified period (e.g., past inventories)
d. Unpaid services produced by households for self-consumption and voluntary services
offered to non-profit making institutions

Production approach / Value-added approach

4. The production approach measures GDP by calculating the total value of production (or
value-added) of all resident producing units in all industries during the specified period.

5. Value-added = Value of output – Value of intermediate consumption

6. Sum of value-added of all RPUs of an economy = GDP of the economy

7. a. GDP at factor cost = Total value-added of all resident producing units


b. GDP at market prices = GDP at factor cost + Indirect taxes – Subsidies

NSS Exploring Economics 5 (3rd Edition) 1 © Pearson Education Asia Limited 2019
Revision Notes (Chapter 1)
Expenditure approach

8. By the expenditure approach, GDP at market prices = C + I + G + X – M

where C: Private consumption expenditure


I: Gross investment expenditure
= Gross fixed investment expenditure + Changes in inventories
= (Depreciation + Net fixed investment expenditure) + Changes in inventories
= Depreciation + Net investment expenditure
G: Government consumption expenditure
X: Exports
= Exports of goods + Exports of services
= (Domestic exports of goods + Re-exports of goods) + Exports of services
M: Imports
= Imports of goods + Imports of services

Remark:

Also called …
Gross investment expenditure Gross domestic capital formation
Gross fixed investment expenditure Gross domestic fixed capital formation
Net fixed investment expenditure Net domestic fixed capital formation
Depreciation Capital consumption allowance

Gross national income (GNI)

9. Gross national income (GNI) is the total income earned by residents of an economy from
engaging in various economic activities in a specified period.

10. Residents of an economy include:


a. An individual is a resident of an economy if he/she has remained in the economy for at
least 12 months or intends to do so, regardless of his/her nationality.
b. An organisation is a resident of an economy if it ordinarily operates in the economy.

11. GNI = GDP + (Factor income from abroad – Factor income paid abroad)
= GDP + Net factor income from abroad

NSS Exploring Economics 5 (3rd Edition) 2 © Pearson Education Asia Limited 2019
Revision Notes (Chapter 1)

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