How is GDP calculated?

Gross Domestic Product (GDP) is calculated by adding up the total value of all goods and services produced within a country's borders during a specific time period, typically a year. This can be done using either the expenditure approach or the income approach.

The expenditure approach calculates GDP by summing up the total spending on consumption (C), investment (I), government spending (G), and net exports (X - M), where X represents exports and M represents imports. The formula for calculating GDP using the expenditure approach is GDP = C + I + G + (X - M).

The income approach calculates GDP by summing up all the incomes earned by individuals and businesses within the country. This includes wages, salaries, profits, rents, and interest. The formula for calculating GDP using the income approach is GDP = wages + salaries + profits + rents + interest.

Both approaches should yield the same GDP figure, as they are just different ways of measuring the same economic activity within a country.