gnp vs gdp

7/29/2019 gnp vs gdp

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GDP GNP

Stands for: Gross Domestic Product Gross National Product

Definition:

An estimated value of the total worth ofa countrys production and services,on its land, by its nationals and foreigners,calculated over the course on one year

An estimated value of thetotal worth of production andservices, by citizens of acountry, on its land or onforeign land, calculated overthe course on one year

Formula for

Calculation:

GDP = consumption + investment +(government spending) +(exports imports)

GNP = GDP + NR (Netincome inflow from assetsabroad or Net Income

Receipts) - NP (Net paymentoutflow to foreign assets)

Uses: Business, Economic ForecastingBusiness, EconomicForecasting

Application(Context in whichthese terms are

used):

To see the strength of a countrys local

economy

To see how the nationals of acountry are doingeconomically

Layman Usage: Total value of products & Services producedwithin the territorial boundaryof a country

Total value of Goods andServices produced by allnationals of a country(whether within or outsidethe country)

United States $14.119 trillion, $14.265 trillion
http://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/United_States


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Why are the numbers different (GNP vs GDP)?

From the difference above, GNP measures the output generated by a country's enterprises

(whether physically located domestically or abroad) while GDP measures the total output

produced within a country's borders - whether produced by that country's own local firms or by

foreign firms. So, this tells that GNP is always greater than GDP, unless the other factors in GNPdo not contribute in the computations and that is the time GNP approximately equal to GDP.

Why is the GDP not a very good measure of society's welfare?

GDP is a reasonable accurate measure of how well or poorly the economy is performing,

but it has several shortcomings.

When GDP is divided among a population, it gives an average value for every person.

But within a population, it is common to some have people with higher wealth and welfare and

some people with lower welfare. By showing an average value for each person, it may be over-

valueing or under-valueing an individuals welfare.

Sometimes GDP understates how well a country is doing. Non-market activities (such as

the services of homemakers) are not included. It also does not account for increases in product

quality or increases in leisure time. Sometimes GDP overstates how well a country is doing.

Countries with higher GDP often have higher levels of pollution. GDP says nothing about the

distribution of wealth within that country. It says nothing about infant mortality, standard of

living (look at China), or the life expectancy of its people.

Example: A woman who has terminal cancer has to pay large amounts of money for

medical services. She is contributing to GDP, but is he happy? No, obviously.

If we itemize that are included in the GDP must be:

1) final (not intermediary goods)

2) produced within a country (regardless of the nationality of the producer)

3) sold in the legal market

4) produced within this year or period not last year or last period.

but with this said this means that the GDP DOES NOT include:

1) good and services produces and consumed in households

2) good and services sold in the black market

3) goods produced by citizens outside the country


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4) intermediary goods

5) goods produced in past periods (even if resold this period)

all this causes an understatement of a countries GDP, therefore its true income is reported as less

that it really is. That is why we use other measures alongside the GDP such as the GNP, national

income and so on to cover for the flaws of the GDP

Some definitions:

GDP Definition

GDP stands for Gross Domestic Product, the total worth estimated in currency values of anations production in a given year, including service sector, research, and development. That

translates to a sum of all industrial production, work, sales, business and service sector activity inthe country. Usually this is calculated over a period of one year, but there may be analysis ofshort and long term trends to be used for economic forecast. Gross Domestic Product can also becalculated on a per capita (or per person) basis to give a relative example of the economicdevelopment of nations.

GNP Definition

GNP stands for Gross National Product. In general terms, GNP means the total of all businessproduction and service sector industry in a country plus its gain on overseas investment. In somecases GNP will also be calculated by subtracting the capital gains offoreign nationals orcompanies earned domestically. Through GNP an accurate portrait of a nations yearly economycan be analyzed and studied for trends since GNP calculates the total income of all the nationalsof a country. This gives a far more realistic picture than the income of foreign nationals in thecountry as it is more reliable and permanent in nature. Gross National Product can also becalculated on a per capita basis to demonstrate the consumer buying power of an individual froma particular country, and an estimate of average wealth, wages, and ownership distribution in asociety.

How GDP is calculated

GDP of a country is defined as the total market value of all final goods and services producedwithin a country in a given period of time (usually a calendar year). It is also considered the sumofvalue added at every stage of production (the intermediate stages) of all final goods andservices produced within a country in a given period of time.
http://www.diffen.com/difference/Marketing_vs_Saleshttp://www.diffen.com/difference/Category:Businesshttp://www.diffen.com/difference/Activity_vs_Taskhttp://www.diffen.com/difference/Gross_vs_Nethttp://www.diffen.com/difference/Category:Economicshttp://www.diffen.com/difference/Category:Investmenthttp://www.diffen.com/difference/Alien_vs_Immigranthttp://www.diffen.com/difference/Income_vs_Revenuehttp://www.diffen.com/difference/Nature_vs_Nurturehttp://en.wikipedia.org/wiki/Value_addedhttp://en.wikipedia.org/wiki/Value_addedhttp://www.diffen.com/difference/Nature_vs_Nurturehttp://www.diffen.com/difference/Income_vs_Revenuehttp://www.diffen.com/difference/Alien_vs_Immigranthttp://www.diffen.com/difference/Category:Investmenthttp://www.diffen.com/difference/Category:Economicshttp://www.diffen.com/difference/Gross_vs_Nethttp://www.diffen.com/difference/Activity_vs_Taskhttp://www.diffen.com/difference/Category:Businesshttp://www.diffen.com/difference/Marketing_vs_Sales


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The most common approach to measuring and understanding GDP is the expenditure method:GDP = consumption + investment + (government spending) + (exportsimports), or, GDP = C+ I + G + (X-M)

How GNP is calculated

There are various ways of calculating GNP numbers. The expenditure approach determinesaggregate demand, or Gross National Expenditure, by summing consumption, investment,government expenditure and net exports. The income approach and the closely related outputapproach sum wages, rents, [[interest, profits, non income charges, and net foreign factor incomeearned. The three methods yield the same result because total expenditures on goods and services(GNE) is equal to the value of goods and services produced (GNP) which is equal to the totalincome paid to the factors that produced the goods and services (GNI)

Expenditure Approach to calculating GNP:GNP = GDP + NR (Net income from assets abroad(Net Income Receipts))

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