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4/20/2014
Theoretically all three of them should give same final number, but in reality there will be slight difference between each of them.
http://mrunal.org/2011/04/economy-3-methods-of-calculating-gdp.html/print/
2/5
4/20/2014
Second hand products are not counted When you had bought that bike for Rs.30000, 10 years ago, we had counted that money in that years GDP. So second hand-product sale money cannot be counted in this years GDP. Now, I buy your second-hand bike from an auto dealer, (who gets Rs.1000 Commission) should we include it in the (C)? Hell Yes, because he sold his service to me uniquely. Every time he sells a second hand product, although no new product is created but new service is delivered by him. WHAT IF SAME 1000 RUPEE NOTE IS CHANGING HANDS?
http://mrunal.org/2011/04/economy-3-methods-of-calculating-gdp.html/print/
3/5
4/20/2014
Each service or product has separate value even if same currency note is used to purchase it I gave a note of Rs.1000 to that dealer as part of his brokerage (dalaali) and he gives the same Rs.1000 note to the electricity company for his monthly bill. Same Rs.1000 note is changing hands so is our GDP =Rs.1000? Nope. GDP is the money value of everything produced within India. So brokerage service is Rs.1000 separately and the electricity produced is also worth Rs.1000 separately. Therefore, Even as same 1000 rupee note is given to both parties. Total GDP=1000 brokeage+1000 electricity bill=Rs.2000 If electri.co gives that 1000 rupee note to its peon as salary, then again it has to be counted. Because peon sold his unique service separately to the company. So in that case Total GDP =Brokerge+Electric bill+peon^ salary=Rs.3000
4/20/2014
You remember that GDP means Money value of everything we produce within India. So if we import something, it has to be subtracted, because it is not produced within India. So formula (for ease In remembering)
GDP = Consumer+Investor+Governer + (eXporter iMporter)
GDP(Expenditure)=C+I+G+(X-M)
#B: Income Method of counting gdp
Here you count everyones income. But some people may be running business in credit (udhaari), sometimes payments are delayed. So may not give the full picture for the given year.
http://mrunal.org/2011/04/economy-3-methods-of-calculating-gdp.html/print/
5/5