Students Corner

How are GDP and GNP measured?

There are a number of ways to approach the measurement of GDP. In Ireland two of these are used. Under the income approach, we measure the different elements of income such as profits of companies and the self-employed, wages and salaries and rent of dwellings. Some adjustments are then made for items like stock changes.

The other approach, is to measure the different ways in which this income is spent on goods and services. We estimate personal expenditure, government expenditure, spending on capital investment and exports. The latter contributes to Ireland's GDP because it is spending by other countries on Irish produced goods and services. On the other hand, we subtract imports from our calculation because this total is spending by Irish persons on the outputs of other countries.

These two estimates should give exactly the same answer but, because of the different sources used, and the degree of estimation involved, never do. This is the experience in all countries. Countries resolve the problem in various ways. In Ireland, the official level of GDP is taken to be the average of the expenditure and income estimates. A balancing item is also displayed which is half of the difference between the two estimates. This is the amount by which both estimates have to adjusted to agree with the official level of GDP.

In making these estimates, CSO uses a wide variety of sources. Almost all of the different inquiries conducted by CSO are used in one way or another as well, of course, as providing information about their own subject matter. For example, employment totals from the Quarterly National Household Survey (PDF 202KB) help in calculating total wages and salaries, the Household Budget Survey (PDF 321KB) is used in estimating personal spending and so on.