(GDP) or Gross Domestic Product is a method of calculation used to determine the product of goods and price calculations. It is the total market value of goods and services rendered that are produced in the economy over a year. According to the text there are two different ways that you can calculate GDP. One way is called the expenditure approach in which you use the sum of all the expenses for all fin goods during a given time frame, or you can use the income approach, which is the sum of all income using the production and producing of goods in the final phase.
In the following example data set the income approach was used to determine the GDP for 2005 and 2006.
2005: (90 x $18) + (180 x $100) or the quantity of the CD’s times the Price of the CD’s plus the Quantity of the Racquets times the price of the Racquets. = $19,620
2006: (100 x $20) + (190 x $110) or the quantity of the CD’s times the Price of the CD’s plus the Quantity of the Racquets times the price of the Racquets. = $22,900
The following calculation was used to calculate the GDP for growth between 2005 and 2006 using the 2006 prices were as follows:
($22,900-$19,620) / 19,620
3280 / 19,620
0.16 Or 16%
Growth from 2005 to 2006
In order to calculate the percentage GDP growth from 2005 to 2006 using 2005 prices you will have to take the difference between the GDP and divide it by the initial GDP number....