In this video, we would like to discuss how GDP is measured. So, how is  national income measured? The most commonly used measure of a net of a  country's national income is gross domestic product, or GDP. Again, we'll define  GDP as the total value of all final goods and services produced in an economy  in a year. Now, GDP may be defined as the total of all economic activity in a  country, regardless of who of who owns the productive assets. There are  different methods that are used to calculate the GDP figure. So let's kind of  figure out what this is. Number one, the output method. This measures the  actual output of the goods and services produced. So the output method. What  is output by the industry? Whether it be like I said, service-related industry,  manufacturing, you know, entertainment, whatever is output by those industries,  that is what we are measuring. Those are the data points that we'll use in our  measurements. This is calculated by summing all of the value added by all the  firms in an economy, it's an aggregate. It's a sum total of all value-added  products, right, sold or services. When we say value-added, it means that at  each stage of production, in the production process, we deduct the cost of  inputs so as to not double count them. So look, we're only we are only  measuring the profit created by the delivery of these products, whether it's  goods, services, manufacturing, entertainment, etc. So we don't want to count  total revenue because then we will not get a true picture because you cannot  count the costs of the inputs. The data is usually grouped according to the  different sectors in the economy: primary, secondary, and tertiary. The income  method is the next method. This measures the value of all incomes earned in  the economy. This measures the value of all spending on goods and services in  the economy. This is calculated by summing up the spending by all different  sectors in the economy: spending by households, known as consumption;  spending by firms, known as investment; spending by governments; spending  by foreigners on exports minus spending on imports, known as net exports. So  again, GDP equals consumption plus investment plus government spending  plus the difference between exports and imports. So this is how we're going to  figure out the GDP number. We're going to add all the spending by households  inside the economy. Then we're going to add the investment by firms into the  economy, and we'll also add in the government spending component to the  GDP. Again, we'll look at the exports and the imports. Now you're going to have  a surplus, or you're going to have a deficit when it comes to figuring out your  current account, right? Your trade deficit or your trade surplus, right? So we're  going to subtract out the exports from the imports, and then you'll figure this into  this component into your GDP figure. So you'll either add or subtract based on  do you have a surplus or a deficit. 



Last modified: Thursday, September 17, 2026, 9:03 AM