How GDP is Calculated With Income Approach

Second and Easy way to Calculate GDP of a country is by using Income Approach under which income of the residents of country is considered and the main point for calculation GDP is a payment made by firms to Households for factors of production like Working as labor, employee, etc.

How GDP is Calculated With Income Approach

Income Approach 

When GDP is calculated by using the Income Approach then GDP is called GDI Gross Domestic Income which includes Wages, salaries, Profit, and Interest or commission earned by the residence of Country this collectively makes total Income at factor cost, or we can also express it as

GDI at Factor Cost:-  Compensation to employees + Operating Surplus of firms + other incomes 

and after this, we will add taxes in income minus subsidies on import and production, and we will get GDI at Market or final Price which is The GDP of Country according to Income Approach.

GDP = GDI at Factor Cost + Taxes - Subsidies 

Other Approach to Calculate [Gross Domestic Products]

  1. Income Approach [Click Here]
  2. Expenditure Approach [Click Here]

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