Understanding National Accounts and Economic Indicators
Gross Domestic Product (GDP), calculated using the cost factors method, sums the factors of all firms in the economy. This equals the income generated by that economy.
GDP at current prices, or nominal GDP, is measured using the prices of the period when production takes place. GDP at constant prices, or real GDP, is measured using prices from a specific base year, thus eliminating the effect of inflation.
The price indices are weighted measures of prices for each period, where each good or service is valued according to its 'weight' or importance in total output.
The Consumer Price Index (CPI) represents the costs of a basket of goods and services consumed by a representative household. It is calculated as a weighted average of final consumer goods.
The GDP deflator is a price index obtained by dividing nominal GDP by real GDP for each year.
The Gross National Product (GNP) measures production that comes from labor or capital owned by residents of a country, while GDP measures the total product obtained from labor and capital located within the country.
Depreciation: This estimates the extent to which capital equipment has been exhausted or"spen" during the period in question.
The GDP deflator is defined as the price of GDP.
The National Accounts measure the activity of an economy over a period (typically one year), recording transactions between its various actors. By expressing all goods and services in monetary value, they can be aggregated into a unit, GDP.
When measuring GDP, only goods and services sold to end users are counted, not all goods produced in the economy. It also only includes items produced within the time period in question. Its value depends on the length of time used for measurement (typically one year).
Private consumption is the expenditure on goods and services by households. It includes perishable and durable goods. This represents the share of GDP acquired by families as end users.
Private investment is the sum of plant and equipment purchased by businesses, the construction of new dwellings for residential use, and changes in inventories (properties that have been produced but not yet sold). The variation in inventories is included in GDP.
Public spending is undertaken by the public sector for goods and services. It includes all public sector expenditures for employee payroll plus the costs of goods and services purchased from the private sector. This spending, along with public sector investment, contributes to GDP.