GDP

Growth RatePresentation By:

Muhammad Zain Ali Shah

Background:

In the mid-1930s, two Keynesians, Simon Kuznets and

Richard Stone, began to develop this terminology. They

developed national income accounting, a set of rules and

definitions for measuring economic activity in the

aggregate economy.

W h a t i s G D P ?

• Gross Domestic Product

• Used to measure the health of a country's economy

• The total dollar value of all goods and services produced in a country over a specific time period

• Uses as a comparison to the previous year

Approaches of calculating GDP:

3. Expenditure approach

GDP = C + I + G + Xn

2. Income approach

1. Production approach

Production Approach

• Determine the intermediate

consumption, i.e., the cost of material,

supplies and services used to produce

final goods or services.

• Deduct intermediate consumption from

gross value to obtain the gross value

added.

• GDP = gross value of output – value of

intermediate consumption.

Income Approach

Computing GDP:G D P =

C o m p e n s a t i o n o f e m p l o y e e s

+

R e n t

+

I n t e re s t

+

P ro p r i e t o r ’s I n c o m e

+

C o r p o r a t e P ro f i t s

+

I n d i re c t b u s i n e s s t a x e s

+

D e p re c i a t i o n

+

N e t f o re i g n f a c t o r i n c o m e

The economy is divided into four

sectors:

• Household

• Business

• Government

• Foreign sector

Expenditure Approach

Consumption

e.g., durables and nondurables[C]

Investment

e.g., business investment in equipment and factories

[I]

Government Spending

e.g., government purchases of goods and services

[G]

Net Exports

exports to other countries, less imports

[X]Computing GDP:

GDP = C + I + G + Xn

The Economy of Pakistan:

• Developing country

• Its economy is the world’s 27th largest economy in the term of purchasing

Year Gross Domestic Product US Dollar Exchange

1960 20,058 4.76 Pakistani Rupees

1965 31,740 4.76 Pakistani Rupees

1970 51,355 4.76 Pakistani Rupees

1975 131,330 9.91 Pakistani Rupees

1978 283,460 9.97 Pakistani Rupees

1985 569,114 16.28 Pakistani Rupees

1990 1,029,093 21.41 Pakistani Rupees

1995 2,268,461 30.62 Pakistani Rupees

2000 3,826,111 51.64 Pakistani Rupees

2005 6,581,103 59.86 Pakistani Rupees

2014 104.14 Pakistani Rupees

2000 4.3 2010 1.6

2001 2 2011 2.8

2002 3.2 2012 4

2003 4.8 2013 6.1

2004 7.4

2005 7.7

2006 6.2

2007 4.8

2008 1.7

2009 2.8

Year GDP Rate Year GDP Rate

Comparison of GDP between Pakistan and India

Year GDP

Rate

Year GDP

Rate

2000 3.8 2010 10.3

2001 4.8 2011 6.6

2002 3.8 2012 4.7

2003 7.9 2013 5

2004 7.9

2005 9.3

2006 9.3

2007 9.8

2008 3.9

2009 8.5

Year GDP

Rate

Year GDP

Rate

2000 4.3 2010 1.6

2001 2 2011 2.8

2002 3.2 2012 4

2003 4.8 2013 6.1

2004 7.4

2005 7.7

2006 6.2

2007 4.8

2008 1.7

2009 2.8

Comparison of GDP growth rate

between Pakistan and India

PakistanIndia

• Unemployment

• Lack of foreign investment

• Low rate of capital formation

• Low level of productivity

• Illiteracy

• Corruption

• Law & order

• Population pressure

Reasons of Downfall of GDP

Thank you