How do you calculate GDP using the income approach?

The income approach assesses the total income people within the country earned for a specific time period. It also accounts for depreciation, foreign income, and sales tax. Here are the steps you can follow to calculate GDP using the income approach: 1. Assess the country's total income Start by determining the country's total income.

What is a GDP formula?

This GDP formula takes the total income generated by the goods and services produced. Total National Income – the sum of all wages, rent, interest, and profits. Sales Taxes – consumer taxes imposed by the government on the sales of goods and services. Depreciation – cost allocated to a tangible asset over its useful life.

How do you calculate GDP & depreciation?

GDP = Total national income + Sales taxes + Depreciation + Net foreign factor income Here's an example of what this formula may look like if total national income is $150,000, sales taxes are $50,000, depreciation is $5,000, and net foreign factor income is $20,000:

What is the income approach?

The intuition behind the income approach is pretty straightforward because every time you spend money, that spending is someone else's income. Learn more about the income approach and its categories: wages, interest, rent, and profit. Created by Sal Khan. Want to join the conversation?