# Looking for a formula for calculating GDP using the production method

**URL:** <https://boards.straightdope.com/t/looking-for-a-formula-for-calculating-gdp-using-the-production-method/784228>\
**Category:** Factual Questions\
**Created:** [April 11, 2017, 11:00am UTC](https://boards.straightdope.com/t/looking-for-a-formula-for-calculating-gdp-using-the-production-method/784228 "2017-04-11T11:00:29Z")\
**Posts on this page:** 3\
**Page:** 1

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**Author:** ![davidmich](https://avatars.discourse-cdn.com/v4/letter/d/e56c9b/32.png) [@davidmich](https://boards.straightdope.com/u/davidmich)\
**Post date:** [April 11, 2017, 11:00am UTC](https://boards.straightdope.com/t/looking-for-a-formula-for-calculating-gdp-using-the-production-method/784228/1 "2017-04-11T11:00:29Z")

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Hi

After searching wikipedia and other sites I failed to find a handy formula for calculating GDP using the production method, similar to the one below. Perhaps someone could suggest which of the below listed ones are the best/most common. I look forward to your feedback

Expenditure:  
GDP (Y) = C + I + G + NX, (NX = X - M)  
GDP = C + I + G + (X-M)

Income:

1. GDP = COE + GOS + GMI + TP & M – SP &  
2.GDP=R+I+P+SA+W  

2. NI = W + R + i + PR

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**Author:** ![Hellestal](https://avatars.discourse-cdn.com/v4/letter/h/3ab097/32.png) [@Hellestal](https://boards.straightdope.com/u/Hellestal)\
**Post date:** [April 11, 2017, 1:36pm UTC](https://boards.straightdope.com/t/looking-for-a-formula-for-calculating-gdp-using-the-production-method/784228/2 "2017-04-11T13:36:54Z")

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The reason you’re having trouble finding a formula might be that the formula is so simple and straightforward that people don’t consider writing it out.

Another term for the “production method” of calculating GDP is the “value-added method”. Unlike the expenditure method where you look at the value of all final goods sales – excluding intermediate goods – what you need to do in this case is count the value-added of every step in the chain. A formula would look like:

**Value of sales MINUS cost of inputs**

You would add up this figure for every economic entity in the economy. See the following for an example: [(note: PowerPoint presentation)](http://faculty.riohondo.edu/mjavanmard/Slavinpowerpoint/powerpoints/GDP/valueadded.ppt). Or for a longer description of the value-added approach, you can look at this (long) article from the UN about the “production approach”. [(Note: PDF file.)](https://unstats.un.org/unsd/economic_stat/china/pgdp/GDP%20by%20production%20approach.pdf) Keep in mind that the UN is using the System of National Accounts definitions, whereas the US relies on NIPA definitions which are slightly different.

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**Author:** ![davidmich](https://avatars.discourse-cdn.com/v4/letter/d/e56c9b/32.png) [@davidmich](https://boards.straightdope.com/u/davidmich)\
**Post date:** [April 11, 2017, 7:22pm UTC](https://boards.straightdope.com/t/looking-for-a-formula-for-calculating-gdp-using-the-production-method/784228/3 "2017-04-11T19:22:45Z")

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> [@Hellestal](#):
>
> The reason you’re having trouble finding a formula might be that the formula is so simple and straightforward that people don’t consider writing it out.
> 
> Another term for the “production method” of calculating GDP is the “value-added method”. Unlike the expenditure method where you look at the value of all final goods sales – excluding intermediate goods – what you need to do in this case is count the value-added of every step in the chain. A formula would look like:
> 
> **Value of sales MINUS cost of inputs**
> 
> You would add up this figure for every economic entity in the economy. See the following for an example: [(note: PowerPoint presentation)](http://faculty.riohondo.edu/mjavanmard/Slavinpowerpoint/powerpoints/GDP/valueadded.ppt). Or for a longer description of the value-added approach, you can look at this (long) article from the UN about the “production approach”. [(Note: PDF file.)](https://unstats.un.org/unsd/economic_stat/china/pgdp/GDP%20by%20production%20approach.pdf) Keep in mind that the UN is using the System of National Accounts definitions, whereas the US relies on NIPA definitions which are slightly different.

Thank you Hallestal. Very helpful.