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Write down the three identities of calculating the GDP of a country by the three methods. Also briefly explain why each of these should give us the same value of GDP.

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Gross National Product (GNP) equals Gross National Income equals Gross National Expenditure,

i.e. GNP = GNI = GNE

These are equal because national income is a circular flow of income. Aggregate expenditure is equal to aggregate output which in turn, is equal to aggregate income. However each method has some different items, yet they show exactly identical results. 

Their identity can be shown in the following manner: Reconciling Three Methods of Measuring Gross.

                           National Product at Market Price

Income Method Product Method Expenditure Method
(1) Compensation of employees Net value added in Primary Sector Private final consumption Expenditure
(2) Operating Surplus Net value added in Secondary sector Government final consumption Expenditure
(3) Mixed Income of Self Employed Net value added in Tertiary Sector Gross domestic Capital formation
(4) Consumption of fixed capital Consumption of fixed capital Net exports (X-M)
(5) Net indirect Taxes Net indirect Taxes Already included
(6) Net factor Earning from Abroad Net factor Earning from abroad Net factor Earning from Abroad

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