GDP MEASUREMENT METHODS AND PROBLEMS OF GDP AS A MEASURE OF NATIONAL INCOME

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Gross domestic product popularly known as GDP is the measure of the total output produced within a country at a particular period of time usually one year. It excludes all income from abroad be it from foreigners or citizens but includes all income earned by both foreigners and citizens living in a country.
Gross Domestic Product is a broad topic but we shall be restricting our views to the three measurement methods that can be used in measuring GDP
1 OUTPUT METHOD OR VALUE ADDED METHOD: The differences between the sales values and the values of the intermediate goods used in the production are added together to get the GDP. For example the difference between the value of a loaf of bread and the flour used in making the bread is the value added to the flour. It's such values that are added to give the GDP in this method.
2.EXPENDITURE METHOD: This method aggregates all expenditures on domestic goods and services including investments, government demands, net export and consumptions by households,firms and individuals in a country.
3.INCOME METHOD: In this the incomes of all domestic agents, households and firms in the economy are added together to give the GDP. Incomes could be inform of rent wages and profit.
Any of the above methods can be used in the measurement of the GDP of any country. That not withstanding they are problems associated with GDP which are:
1. It does not take into account foreign claims which means earnings taken away by foreign companies are not considered.
2. It does not include or discount the depreciation of capital goods like buildings,roads amongst others.
3. Products with prices attached and some non market products like health are captured in GDP. The others are neglected.

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