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Gross domestic product (GDP)is a measure of economic activity which

captures the value of goods and services that produces during a given

period. GDP can be expressed in nominal or real terms. Nominal GDP

reects the value of all the goods and services which are produced during a

given period, using their price at the time of production. Real GDP also

reects the value of produced goods and services, but it uses constant

consumer and producer price indices to remove the eects of rising price

levels (ination. Periods of real GDP growth are thought to enhance the

welfare of individuals as economic growth allows average incomes to rise,

supporting a higher level of consumption. Periods of negative real GDP

growth are associated with lower incomes, lower consumption and

conse!uently a lower standard of living.

The three approaches

GDP can be estimated using three dierent methods"

#. $he productionestimate is based on the value of %nal output in theeconomy less the inputs used up in the production process. &inaloutputs include products such as cars, while intermediate goods areinputs used in the production of another good or service, such as cartyres, electricity and advertising. 's the value of the %nal good (thecars price reects both the value of its inputs (the tyres and theengineering expertise of the manufacturer, adding the %nal output ofthe tyre manufacturer to %nal output of the car manufacturer togetherwould overestimate GDP. $o avoid this double counting, the value)

added at each stage of production is calculated and aggregated. $his is*nown as gross value added (G+', which is further adusted for taxesand subsidies on products to create a GDP estimate.

-. $he expenditureestimate is based on the value of total expenditureon goods and services, excluding intermediate goods and services,produced in the domestic economy during a given period. hereas theproduction approach captures the value of production, the expenditureapproach reects the value of spending by corporations, consumers,overseas purchasers and government on goods and services. $heprimary data for this measure come from expenditure surveys ofhouseholds and businesses, as well as from data on government

expenditure. /peci%cally, information from the 0iving 1osts and &ood/urvey, the 2nternational $rade in /ervices survey and the 3etail /ales2n!uiry are used, along with data on producer and consumer prices.

4. $he incomeestimate measures the incomes earned by individuals (forexample, wages and corporations (for example, pro%ts directly fromthe production of outputs (goods and services. $he main data for thisapproach to measuring GDP come from the 5uarterly 6perating Pro%ts,

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'verage ee*ly 7arnings and employer surveys, along withadministrative data from 89 3evenue : 1ustoms.