Intermediate product includes goods and services for. Final products final products. Circulation of goods and resources, income and expenses in the economy

Gross Domestic Product (GDP) is the sum of the values of all goods and services produced in the state. Reported in US dollars. Determined at the end of the financial year. By calculating GDP annually, you can track the development of the economy. A change in the indicator may indicate how successful the economic policy was in the state. Knowing how to calculate GDP will help you understand the course of many macroeconomic processes. Methods for calculating GDP involve the use of one of three methods

End-use method or calculation of gross domestic product by expenditure

When calculating the GDP indicator in this way, you need to add up the costs of all participants in the economic process, namely:

Consumer expenditures of citizens (All expenses incurred by households, as well as the state for the maintenance of budgetary organizations, expenses of non-profit firms for the purchase of products for personal and shared use, if organizations serve households; in this case, expenses are long-term, for example, buying a car, and short-term – purchase of products; expenses for the purchase of services, including on credit, are separately allocated);
The totality of investments in the economy (Investments are funds invested by an organization or an individual, for example, in the purchase of equipment, as well as the purchase of real estate or software for the operation of a company. The exchange of assets is not considered an investment, and the acquisition of funds is savings. Also, the purchase itself securities are not considered an investment if the company does not subsequently use this proceeds to modernize production, etc.)
Government expenditures (Funds spent by the state on the purchase of final goods. This includes payments of salaries to public sector employees and the purchase of weapons, as well as government investments.)
Net exports (is the difference between the total value of imported and exported products)

We obtain the formula for GDP per capita, which determines GDP using the final use method:

GDP = C + I + G + Xn

In the formula for expenses: C – consumer expenses, I – investments, G – government. costs and X is an indicator of net exports (from the total cost of exports we subtract the amount of imports).

Production method or finding the sum of all added values

To calculate the GDP indicator using this method, you need to add up all the added value of goods manufactured in the country. Added value is that which does not include market prices for products purchased to produce the final product or service, therefore, it is the cost that arose during production. Otherwise, when calculating GDP, some goods/services will be counted twice, and the result will be significantly distorted upward.

The advantage of this method is that it allows one to assess the role of a certain production or organization in the structure of state GDP. To find VA (value added), you need to subtract from the profit received during sales the amount spent on products needed in production.

We get the following formula for calculating GDP:

GDP = DS + NPI – C

where: VA is value added, NPI is a tax on production and imports, and C is subsidies for imports and production.

Method of accounting for GDP by income or distribution method

To find the level using this method, you should add up all possible factor incomes and add depreciation charges and indirect taxes. The last two components are called non-income.

The GDP formula by income will include:

salaries of the organization’s employees (this also includes additional and social payments, for example, bonuses and pensions)
gross mixed income and gross profit (funds remaining with the manufacturer, who paid the employees and contributed taxes to the treasury)
Import and production taxes (mandatory payments to the state stipulated by law. This includes duties, land tax, VAT, license tax, etc.)
rent
depreciation
interest on bank deposits

GDP does not include transfer payments (in return for which nothing was made). These include unemployment benefits and other social benefits. payments from the state, such as pensions, as well as the purchase of second-hand goods, financial transactions between private individuals.

We get the following formula for calculating GDP:

GDP = Salary + R + Pr + VD + KS + A – NFD (from abroad)

in which: ZP is the funds spent on payments to employees, P is the cost of rent, PR is revenue from interest on, KS is indirect taxes, A is depreciation and NFD is foreign net factor income.

Nominal and real GDP

GDP is calculated in money, so it is necessary to take into account price dynamics during the reporting period. Therefore, there are two types of GDP.

Nominal is determined in prices existing at the moment. It can increase in two cases: with an increase in production volumes and with an increase in prices. Real GDP is calculated taking into account the prices of the base period - the one that is taken as a basis. For example, in the United States - 1996.

Real GDP is an indicator of output, since increases or decreases in prices do not change its indicator. To find real GDP, you need to adjust the nominal GDP by the price index. To do this, the nominal GDP indicator must be divided by a price index equal to the ratio of prices in the year under review to prices in the base year.

To bring nominal GDP to the real figure, you need to know the consumer price index or. The CPI is influenced by the cost of the 300 most commonly purchased goods, and the GDP deflator generally illustrates the change in prices for all goods.

GDP adjustment by PPP

In order to ensure maximum objectivity in comparing the GDP of different countries, GDP is calculated using purchasing power parity (PPP). This is explained by the fact that, although the calculation of GDP in all world countries is carried out in US dollars, this does not take into account the purchasing power of money in different countries and the difference

Gross Domestic Product (GDP)

Gross National Product is the total market value of all final goods and services produced in an economy (within a country) during one year.

Let's analyze each word of this definition:

Cumulative. GDP is an aggregate indicator characterizing the total volume of production, total output.
Market. The value of GDP includes only official market transactions, i.e. which have gone through the purchase and sale process and have been officially registered. Therefore, GNP does not include:

a) self-employment (a person builds his own house, knits a sweater, renovates an apartment, a master repairs his own TV or car, a hairdresser does his own hair);

b) free work (friendly assistance to a neighbor to fix a fence, to a friend to make repairs, to a friend to take him to the airport);

c) the cost of goods and services produced by the “shadow economy”.

Although the sale of illegally produced products is a market transaction, it is not officially registered or recorded by the tax authorities. The production volume of this “sector” of the economy in developed countries amounts to between a third and a half of total output. The shadow economy refers to those types of production and activities that are not officially registered and are not taken into account by national statistical and tax services. The shadow economy, therefore, includes not only illegal activities (drug trafficking, underground dens and gambling houses), but also completely legal types, the profits from which are, however, sheltered from taxes. To estimate the share of the shadow economy, there are no direct methods of calculation, and, as a rule, indirect methods are used, such as additional electricity consumption above that officially consumed and additional money supply (amount of money) in circulation above that required to service official transactions.

Price. GDP measures total production in monetary terms, i.e. in value form, since otherwise it is impossible to combine apples with sheepskin coats, cars, computers, CD players, Pepsi-Cola, etc. Money serves as a meter for the value of all goods, allowing one to evaluate and compare the values of all the various types of goods and services produced by the economy.
Ultimate. All products produced by the economy are divided into final and intermediate. Final products are products that go into final consumption and are not intended for further industrial processing or resale. Intermediate products go into the further production process or resale. As a rule, intermediate products include raw materials, materials, semi-finished products, etc. However, depending on the method of use, the same product can be both an intermediate product and a final product. So, for example, meat bought by a housewife for borscht is a final product, since it went into final consumption, and meat bought by a McDonald's restaurant is an intermediate product, since it will be processed and put into a cheeseburger, which will be the final product in this case. product. All resales (sales of used items) are also not included in GDP, since their value has already been taken into account once when they were first purchased by the end consumer.

GDP includes only the value of final products in order to avoid repeated (double) counting. The fact is that, for example, the cost of a car includes the cost of the iron from which steel is made; steel from which rolled products are produced; rolled metal from which the car is made. The cost of final products is therefore calculated based on added value. Let's look at this with an example. Suppose a farmer grew grain, sold it to a miller for $5, who ground the grain into flour. He sold the flour to a baker for $8, who made dough from the flour and baked bread. The baker sold the baked goods to a baker for $17, who sold the bread to a buyer for $25. Grain for the miller, flour for the baker, and baked goods for the baker are intermediate products, and the bread that the baker sold to the buyer is the final product.

Table 1. Value added

grain $5 $0 $5

flour $8 $5 $3

dough $17 $8 $9

bread $25 $17 $8

Total: $55 $30 $25

The first column represents the cost of all sales (total revenue from sales of all economic agents), equal to $55 (total output). In the second - the cost of intermediate products ($30), and in the third - the sum of added values ($25). Thus, value added represents the net contribution of each producer (firm) to total production. The amount of added value ($25) is equal to the cost of the final product, i.e. the amount that the end consumer paid ($25). Therefore, in order to avoid repeated calculations, only value added equal to the value of final products is included in GNP. Value added is the difference between total sales revenue and the cost of intermediate products (that is, the cost of raw materials that each manufacturer (firm) buys from other firms). In our example: 55 – 30 = 25 ($). In this case, all internal costs of the company (for wages, depreciation, capital rental, etc.), as well as the company’s profit, are included in added value.

Goods and services. Anything that is not a good or service is not included in GDP. Those payments that are not made in exchange for goods and services are not included in the value of GDP. Such payments include transfer payments and non-productive (financial) transactions. Transfer payments are divided into private and public and are like a gift. Private transfers include, first of all, payments made by parents to children; gifts that relatives give to each other, etc. Government transfers are payments that the government makes to households through the social security system and to firms in the form of subsidies. Transfers are not included in the value of GDP: 1) since transfers do not involve payment for either goods or services, i.e. As a result of this payment, there is no change in the value of GDP, i.e. nothing new is produced, and total income is only redistributed; 2) to avoid double counting, since transfer payments are included in household consumption expenditures (as part of their disposable income) and in firms' investment expenditures (as subsidies). Financial transactions include the purchase and sale of securities (stocks and bonds) on the stock market. Since there is also no payment for goods or services behind the security, these transactions do not change the value of GDP and are the result of a redistribution of funds between economic agents. (It should be borne in mind that the payment of income on securities is necessarily included in the value of GDP, since it is a payment for an economic resource, i.e. factor income, part of the national income).
Produced in the economy (within the country). This statement is important in order to understand the difference between the Gross Domestic Product (GDP) and the Gross National Product (GNP). GNP is the total market value of all final goods and services produced by a country's citizens using what they own, i.e. national factors of production, no matter in the territory of a given country or in other countries. When determining GDP, the criterion is the factor of nationality. And GDP is the total market value of all final goods and services produced within a given country, whether using domestic or foreign factors of production. When determining GDP, the criterion is the territorial factor. In most developed countries, the difference between GDP and GNP does not exceed 1%. The difference between these indicators is significant for countries that receive high income from the services they provide to citizens of other countries (for example, tourism services - Cyprus, Greece, Malta, etc. - or banking services - Luxembourg, Switzerland).
Within one year. In accordance with this condition, all goods produced in previous years, decades, eras are not taken into account when calculating GDP, since they have already been taken into account in the value of the GDP of the corresponding years. Therefore, to avoid double counting, GDP includes only the value of a given year's output.

Ways to measure gross domestic product (GDP)

Three methods can be used to calculate GDP:

by cost (end-use method);
by income (distribution method);
by value added (production method).

The use of these methods gives the same result, since in economics total income is equal to the value of total expenses, and the value of added value is equal to the cost of the final product, while the value of the final product is nothing more than the sum of the expenses of final consumers on the purchase of the total product.

GDP "BY EXPENDITURE"

GDP, calculated by expenses, is the sum of the expenses of all macroeconomic agents, since in this case it is taken into account who acted as the final consumer of goods and services produced in the economy and who spent the funds on their purchase. When calculating GDP by expenditure, the following are summed up:

Household expenditures (consumer expenditures - C) + firm expenditures (investment expenditures - I) + government expenditures (government purchases of goods and services - G) + foreign sector expenditures (net export expenditures), denoted Xn (net exports)

Consumer spending (consumption spending – C) is the expenditure of households on the purchase of goods and services. They make up from 2/3 to 3/4 of total expenses, are the main component of total expenses and include: - expenses for current consumption, i.e. for the purchase of non-durable goods (these include goods that last less than one year, but it should be noted, however, that all clothing, regardless of the period of its actual use - 1 day or 5 years - refers to current consumption); - expenses on durable goods, i.e. goods that last more than one year (these include furniture, household appliances, cars, yachts, personal aircraft, etc., with the exception of expenses for the purchase of housing, which are considered not consumer, but investment expenses of households); - expenses for services (modern life cannot be imagined without the presence of a wide range of services, and the share of expenses for services in the total amount of consumer expenses is constantly increasing). Thus,

Consumer expenditure = household expenditure on current consumption + expenditure on durable goods (excluding household expenditure on housing) + expenditure on services

Investment expenses (investment spending - I) are the expenses of firms for the purchase of investment goods. Investment goods are understood as goods that increase the stock of capital. Investment costs include:

Investments in fixed capital, which consist of the costs of firms: a) for the purchase of equipment and b) for industrial construction (industrial buildings and structures);

Investments in housing construction (household expenditures on purchasing housing);

Investments in inventories (inventories include: a) stocks of raw materials and materials necessary to ensure the continuity of the production process; b) work in progress, which is associated with the technology of the production process; c) inventories of finished (produced by the company) but not yet sold products.

Investments in fixed assets and investments in housing construction constitute fixed investments. Investment in inventories represents the changing part of investment, and when calculating expenditures, GDP includes not the amount of inventories themselves, but the amount of changes in inventories that occurred during the year. If the stock of stocks increases, then GDP increases by a corresponding amount, since this means that additional investments were made in a given year that increased stocks. If the value of inventories has decreased, which means that in a given year the products produced and replenished in the previous year were sold, therefore, the GDP of that year should be reduced by the amount of the decrease in inventories. Thus, investment in inventories can be either positive or negative.

When calculating GDP by expenditure, investment is understood as gross domestic private investment. Gross investment (gross investment - Igross) is a total investment, including both restoration investments (depreciation - depreciation - A) and net investments (net investment - Inet): I gross = A + I net This division of investments is associated with features of the functioning of fixed capital. The fact is that in the process of its use, fixed capital wears out, is “consumed” and requires replacement, “restoration” of wear and tear. That part of the investment that goes to compensate for the wear and tear of fixed capital is called restoration investment or depreciation. In the system of national accounts, they appear under the name “capital consumption allowances,” which can be translated as “the cost of consumed capital” or “consumption of fixed capital” in the economy. Thus, dividing investment into net investment and depreciation only applies to fixed assets. Investment in inventory is a pure investment.

Net investment is additional investment that increases the amount of capital of firms. The importance of net investment lies in the fact that they are the basis for the expansion of production and growth in output. If the economy has net investment I net > 0, i.e. gross investments exceed depreciation (recovery investments), I gross > A, this means that in each subsequent year the real volume of production will be higher than in the previous one. If gross investment is equal to depreciation I gross = A, i.e. I net = 0, then this is a situation of so-called “zero” growth, when the economy produces the same amount in each subsequent year as in the previous one. If net investment is negative I net

NET INVESTMENT = net investment in fixed assets + net investment in housing construction + investment in inventories

GROSS INVESTMENT = net investment + depreciation (cost of capital consumed)

Investment expenditures in the system of national accounts include only private investment, i.e. investments by private firms (private sector), and does not include government investments that are part of government procurement of goods and services.

It should also be kept in mind that this component of total expenditure only takes into account domestic investment, i.e. investments of resident firms in the economy of a given country. Foreign investment by resident firms and investment by foreign firms in the economy of a given country are included in the net export component of total expenditure. If net exports are negative, then this means that net foreign investment is negative. If net exports are positive, then net foreign investment is positive.

The third element of total expenditure is government procurement of goods and services (government spending - G), which includes:

Government consumption (expenses for the maintenance of government institutions and organizations that ensure economic regulation, security and law and order, political administration, social and production infrastructure, as well as payment for services (salaries) of public sector employees);

Public investment (investment expenditures of state-owned enterprises)

It is necessary to distinguish between the concept of “government spending” and the concept of “government spending”. The latter concept also includes transfer payments and interest payments on government bonds, which, as already noted, are not taken into account in GDP, since they are neither a good nor a service, are not provided in exchange for goods and services, and are the result of a redistribution of total income.

Net exports The last element of total expenditure is net exports (net export – Xn). It represents the difference between export revenues (export – Ex) and import costs (import – Im) of the country and corresponds to the trade balance: Xn = Ex – Im.

GDP by expenditure = consumer spending (C) + gross investment spending (I gross) + government purchases (G) + net exports (Xn)

GDP "BY INCOME"

The second method of calculating GDP is the distribution method or the income method. In this case, GDP is considered as the sum of the incomes of the owners of economic resources (households), i.e. as the sum of factor income. Factor incomes are:

Wages and salaries of employees of private firms, representing income from the “labor” factor, i.e. payment for labor services and includes all forms of remuneration for labor, including basic wages, bonuses, all types of material incentives, overtime pay, etc. (salaries of civil servants are not included in this indicator, since they are paid from the state budget (budget revenues) and are part of government procurement, and not factor income);

Rent or rent (rental payments) - income from the “land” factor and includes payments received by owners of real estate (land, residential and non-residential premises) (at the same time, if the homeowner does not rent out the premises he owns, then in the system national accounts, when calculating income in GNP, the income that this landlord could receive if he provided these premises for rent is taken into account; such imputed income is called “imputed rent” and is included in the total amount of rental payments;

Interest payments or interest (percent payments), which are income from capital, payment for the use of capital used in the production process (therefore, the amount of interest payments includes interest paid on the bonds of private firms, but does not include interest paid on government bonds (the so-called “service of public debt”), since government bonds are issued not for production purposes, but for the purpose of financing the state budget deficit);

Profit, i.e. income from the “entrepreneurial ability” factor. In the system of national accounts, profit is divided into two parts in accordance with the organizational and legal form of enterprises:

Profit of the non-corporate sector of the economy, including sole proprietorships and partnerships (this type of profit is called “proprietors’ income”);

Profit of the corporate sector of the economy based on the shareholder form of ownership (share capital) (this type of profit is called “corporate profit.” Corporate profit is divided into three parts: 1) corporate income tax (paid to the state); 2) dividends (distributed portion of profits) that the corporation pays to shareholders; 3) retained earnings of corporations, remaining after the company’s settlements with the state and shareholders and serving as one of the internal sources of financing net investment, which is the basis for the corporation for the expansion of production, and for the economy as a whole - economic growth.

In addition to factor income, GDP calculated by the income flow method includes two elements that are not the income of the owners of economic resources.

The first such element is indirect taxes on business. A tax is a forced payment by a household or firm of a certain amount of money to the government not in exchange for goods and services. Taxes are divided into direct and indirect. Direct taxes include taxes on income, inheritance, and property. The taxpayer and the taxpayer are one and the same economic agent. Indirect taxes are part of the price of a product or service. The peculiarity of indirect taxes is that they are paid by the buyer of a product or service, and the company that produced them pays the state. Thus, the taxpayer and the taxpayer in this case are different economic agents. Since GDP is a cost indicator, then, like the price of any product, it includes indirect taxes, which must be added to the amount of factor income when calculating GDP. Although taxes are state income, they are not included in the amount of factor income, since the state, being a macroeconomic agent, is not the owner of economic resources.

Another element that should be taken into account (added) when calculating GDP by income is depreciation, since it is also included in the price of any product. So,

GDP by income = wages + rent (including imputed rent) + interest payments + owner income + corporate profits + indirect taxes + depreciation

GDP "BY VALUE ADDED"

The third method of calculating GDP is the summation of added values for all industries and types of production in the economy (value added calculation method). For example, the American economy is divided into 7 large sectors, such as industry, agriculture, construction, services, etc. For each sector, added value is calculated and then summed up.

Obviously, the value of GDP calculated by different methods should be the same (the difference can only be at the level of statistical errors). Theoretically, this conclusion follows from the fact that the sum of the values added by each firm (at each stage of production) is equal to the cost of the final product. On the other hand, value added is the difference between the firm's revenue and the costs of purchasing the products of other firms, therefore, it is equal to the firm's net income. All this is clearly visible in the diagram corresponding to Diagram 1 (definition of added value)

The bread was sold to the buyer for $25 (the cost of the final product is $25), the agents' income was: farmer $5 + miller $3 ($8 - $5) + baker $9 ($17 - $8) + baker $8 ($25 - $17) = $25, added value is : $5 from the farmer + $3 from the miller + $9 from the baker + $8 from the baker = $25. Thus, all calculation methods gave the same result - $25.

The main requirement when calculating GDP and GNP indicators is that all goods and services produced during the year are taken into account only once, that is, that only final products are taken into account in the calculation, and intermediate products that can be bought and resold many times are not taken into account. GDP and GNP reflect the results of activities in 2 areas of the national economy - material production and services; both are defined as the value of the total volume of final production of goods and services in the economy for 1 year (quarter, month). Final products are goods and services that are purchased by consumers for final use rather than for resale. Intermediate products are goods and services that are further processed or resold several times before reaching the final consumer. If we sum up the goods and services produced in the country in all sectors of the economy, then multiple repeated counting is inevitable, significantly distorting the real volume of the gross product produced. Let us give the following illustrative example. For example, grain grown in agriculture, before turning into the final product - bread, goes through four stages of processing:

collection, threshing and sorting of grain in agriculture;
cleaning, drying and storage in elevators;
grinding grain in mills;
baking bread at bakeries.

If, suppose that the price of grain produced in agriculture is “P” units, then during its processing and processing at three subsequent stages this price is included three more times in the production costs at the elevator, mill and bakery and, ultimately, four times is summed up when calculating production volume. In fact, the real value created at each stage of grain processing and covering the cost of production and income should appear only in the form of wages, depreciation and profit of that particular enterprise. Therefore, to avoid repeated counting, GDP and GNP should act as the value of final goods and services and include only the value created (added) at each intermediate stage of processing.

Let's assume that there are only four firms in the economy: chip manufacturing, monitor manufacturing, computer manufacturing, and Pepsi-Cola manufacturing.

The first company produced 1 million computer chips in a given year and sold them for $200 to each computer manufacturing company.

The second firm produced 1 million computer monitors, which it sold for $300 to every third computer manufacturing firm.

A third firm used these and its own components to produce 1 million computers, which it sold for $1,200 each.

The fourth company produced 200 million packs (6 bottles) of Pepsi-Cola, which it sold at a price of $1.5 per pack. At the same time, the fourth company did not buy a single new computer during the year.

Define:

a) the cost of final and intermediate products in the economy;

b) the value of GDP;

c) the amount of value added for each firm.

Solution:

a) Final products are products that are used for final consumption by any macroeconomic agent and are not intended for further industrial processing or resale. The final products are computers and Pepsi-Cola.

Cost of final products = 1200 * 1 + 1.5 * 200 = 1500 million dollars;

Intermediate products are sent to further production processes or resale. In this case, microcircuits and monitors are classified as intermediate consumption, since they are sent to the further production process.

Cost of intermediate products = 200 * 1 + 300 * 1 = $500 million

b) GDP = value of final products = 1500 million dollars.

c) The value added by each producer (firm) is equal to the difference between sales revenue and the cost of raw materials and materials (intermediate products) purchased by him from other producers (firms), and represents the net contribution of each producer (firm) to total output .

Added value of a chip manufacturing firm = $200 million.

Added value of a company producing monitors = $300 million.

Added value of a computer manufacturing company = 1200 - 200 - 300 = 700 million dollars.

Added value of a firm producing Pepsi-Cola = 1.5 * 200 = $300 million.

The condition of the problem is taken from: Matveeva T. Yu.. Introduction to macroeconomics: textbook. allowance; State University - Higher School of Economics. — 5th ed., rev. - M.: Publishing house. House of State University Higher School of Economics, 2007

A distinction is made between the total and the value of the gross social product, cleared from re-counting. Let us assume conditionally that all social production in the country consists of four industries, technologically related to each other, so that the product of the first enterprise is the raw material for the second enterprise, etc. In this case, only one type of final product will be produced in the country - machine tools. Iron ore, cast iron, steel produced at independent enterprises will be intermediate products. Then the structure of the cost of the product of each redistribution will consist of the cost transferred to the product from the objects of labor (raw materials) consumed in the production process, depreciation (the cost transferred to the product from the means of labor), wages and profit.

The value composition of the gross social product involves identifying the following elements:

Compensation Fund shows the costs of past labor for the production of GP or material costs: depreciation of means of labor and costs of objects of labor (costs of fuel, materials, raw materials, etc.).

Salary fund consists of labor payments to material production workers.

Profit fund is the excess of GP over the costs of its production (compensation fund and wage fund).

National income– incomes of hired workers (wage fund) and entrepreneurs (profit fund).

The total value of the VOP contains re-count, arising as a result of the intra-annual turnover of objects of labor, when the products of labor of some enterprises are supplied as raw materials for processing at other enterprises. At the same time, the deeper the social division of labor, the more technological redistributions a product goes through, the more GPs accumulate in the second count. This property of the GP indicator can be illustrated by the following examples (see Tables 13.1, 13.2).

Gross social product (GSP) is the sum of the cost of production of all enterprises (Table 13.1, column 6). In our example, the total value of the GP is 400 den. units Of these, 220 is the value of the intermediate product, and 180 is the value of the final social product. Final social product in natural material form - these are means of labor and consumer goods, in our case these are machine tools. They are intended for final consumption. A special feature of the intermediate product is that it, as a raw material, goes into further processing.

In the cost of GP 220, this is not only the cost of the intermediate product, but also the value of the so-called repeated account. Re-count – this is the cost of objects of labor that are repeatedly taken into account in the value of the social product. For example, the cost of iron ore is 30 den. units in the GP it is taken into account as the cost of the manufactured product of the first branch of production and as a component of the cost of cast iron. Similarly, the cost of cast iron will be included in the cost of GP as a product of the second branch of production and as an integral part of the cost of steel, etc.

CALCULATION METHOD

Branches of production	Purchased raw materials				Sales proceeds	Final product
Branches of production	Purchased raw materials	Depreciation	Salary	Profit	Sales proceeds	Final product
1	2	3	4	5	6	7
Iron ore




	Intermediate product				Gross social product	KOP Gross domestic product

If we subtract from the cost of the GP the cost of the objects of labor consumed in the production process (the cost of the intermediate product - iron ore, cast iron and steel), we obtain the cost of the GP cleared from re-accounting or the final social product (hereinafter referred to as the CPP). The CPC is part of the GDP produced in the sphere of material production. In terms of value, the final social product (or GDP) is the sum of value added. The added value or final product of the industry (column 7) shows the contribution of a given enterprise to the production of a given product. For example, the cost of cast iron is 70 den. units Of these, 30 is the cost of iron ore, 40 is the added value, showing the cost of processing iron ore.

The volume of GP and the value of re-counting are conditional values. They depend on the organizational structure of production. Let us assume that in our example (see Table 13.1) the iron foundry and steel foundry are being merged into a full-cycle metallurgical plant (see Table 13.2). In this case, the value of added value, and therefore the COP, does not change, while the value of the GOP decreases due to a decrease in the re-account.

Table 13.2

CALCULATION METHOD

Branches of production	Purchased raw materials	Value added during processing of raw materials			Sales proceeds	Final product
Branches of production	Purchased raw materials	Depreciation	Salary	Profit	Sales proceeds	Final product
1	2	3	4	5	6	7
Iron ore
Metallurgy


	Intermediate product	Structure of the cost of the final social product (GDP)			Gross social product	Gross domestic product