Approaches to Calculating GDP

Running Head: APPROACHES TO CALCULATING GDP 1
Approaches to Calculating GDP
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APPROACHES TO CALCULATING GDP 2
Approaches to Calculating GDP
Part 1: Expenditures Approach to Calculating GDP
1. Using Table 3: Gross Domestic Product: Level and Change from Preceding Period
a. The following information for the last quarter was obtained from table 3(in chained
2012 billion dollars):
i. Gross domestic product
20,891.4
ii. Personal consumption expenditures
14,200.6
iii. Gross private domestic investment
3,774.6
iv. Net exports of goods and services
-659.8
v. Government consumption expenditures and gross investment
3,575.9
The last Quarter Data
Component Amount
Gross Domestic Product 20,891.4
Personal Consumption
Expenditure
14,200.6
Gross Private Domestic
Investment
3,774.6
Net Exports of Goods and
Services
-659.8
Government
Consumption Expenditure
and Gross Investment
3,575.9
Bureau of Economic Analysis USA (2019)
b. Calculate the percentage (the proportion) of each category in nominal GDP and in real
GDP.
Using Nominal GDP:
The nominal GDP for the last quarter 0f 2018 was 20,891.4
[Personal consumption expenditures / Nominal GDP] *100%
14,200.6
20,891.4 ×100%= 67.97%
[Gross private domestic investment / Nominal GDP] *100%

APPROACHES TO CALCULATING GDP 3
3,774.6
20,891.4 × 100 %=18.07%
[Net exports of goods and services / Nominal GDP] *100%
−659.8
20,891.4 × 100 %= 3.15%
Government consumption expenditures and gross investment/ Nominal GDP] *100%
3,575.9
20,891.4 × 100 %=¿17.12%
And using Real GDP:
The real GDP for the last quarter of 2018 was 18,784.6
[Personal consumption expenditures / Real GDP] *100%
13,044.2
18,784.6 ×100 %=69.44%
[Gross private domestic investment / Real] *100%
3,474.7
18,784.6 ×100 %=18.50%
[Net exports of goods and services / Real GDP] *100%
−963.2
18,784.6 ×100 %=-5.13%
[Government consumption expenditures and gross investment/ Real GDP] *100%
3,195.3
18,784.6 ×100 %=17.01%
Component Amount Proportion of nominal
GDP(Amount/ Nominal
GDP) GDP=20,891.4
Personal Consumption
Expenditure
14,200.6 67.97%
Gross Private Domestic
Investment
3,774.6 18.50%
Net Exports of Goods and
Services
-659.8 -3.15%
Government Consumption
Expenditures and Gross
3,575.9 17.12%

APPROACHES TO CALCULATING GDP 4
Investment
Component Amount Proportion of Real
GDP( Amount/Real GDP )
GDP=18,784.6
Personal Consumption
Expenditures
13,044.2 69.44%
Gross Private Domestic
Investment
3,474.7 18.50%
Net Exports of Goods and
Services
-963.2 -5.13%
Government Consumption
Expenditure
3,195.3 17.01%
Source: Bureau of Economic Analysis USA (2019)
2. Analysis of the results and reflection
Nominal GDP vs Real GDP
From the results in the tables above, it is clear that the nominal GDP is greater than the
real GDP at all levels. Nominal GDP is not corrected of inflation effects, something done on the
real GDP. Therefore, the real GDP yield a lower value since inflation is essentially a positive
number. Whenever the price level increases, the corrected value of GDP is expected to be lower.
In the data provided above, the overall nominal GDP is presented as $20,891.4 billion. The
figure dwarfs the real GDP (at $18,784.6 billion) by $ 2 ,106.8 billion.
Category taking the largest proportion of GDP
In the year 2018, the data provided shows that personal consumption expenditures
constituted 67.97% and 69.44% of the nominal and real GDP respectively. The expenditures
imply also that the personal income forms the largest part of the GDP of a given nation. Based
on the results, the net exports of goods and services comprises of the smallest category of the
GDP. In 2018, it averaged at a deficit of 3.15% and 5.13% of the nominal and real GDP in that
order.