FACTOID # 2: Puerto Rico has roughly the same gross state product as Montana, Wyoming and North Dakota combined.
 
 Home   Encyclopedia   Statistics   States A-Z   Flags   Maps   FAQ   About 
   
 
WHAT'S NEW
RELATED ARTICLES
People who viewed "GNP" also viewed:
 

SEARCH ALL

FACTS & STATISTICS    Advanced view

Search encyclopedia, statistics and forums:

 

 

(* = Graphable)

 

 


Measures of national income and output are used in economics to estimate the value of goods and services produced in an economy. They use a system of national accounts or national accounting first developed during the 1940s. Some of the more common measures are Gross National Product (GNP), Gross Domestic Product (GDP), Gross National Income (GNI), Net National Product (NNP), and Net National Income (NNI). Economics (deriving from the Greek words οίκω [okos], house, and νέμω [nemo], rules hence household management) is the social science that studies the allocation of scarce resources to satisfy unlimited wants. ... For GDP in neuroscience see Giant depolarizing potentials. ... Net National Product (NNP) is the total market value of all final goods and services produced by citizens of an economy during a given period of time (Gross National Product or GNP) minus depreciation. ... The net national product is the total market value of all final goods and services produced by citizens of an economy during a given period of time, usually a year, after adjusting for the depreciation of capital. ...


There are at least two or three different ways of calculating these numbers. The expenditure approach determines aggregate demand, or Gross National Expenditure, by summing consumption, investment, government expenditure and net exports. On the other hand, the income approach and the closely related output approach can be seen as the summation of consumption, savings and taxation. The three methods must yield the same results because the total expenditures on goods and services (GNE) must by definition be equal to the value of the goods and services produced (GNP) which must be equal to the total income paid to the factors that produced these goods and services (GNI). (GNP=GNI=GNE by definition)


In actual fact, there will be minor differences in the results obtained from the various methods due to changes in inventory levels. This is because goods in inventory have been produced (and therefore included in GDP), but not yet sold (and therefore not yet included in GNE). Similar timing issues can also cause a slight discrepancy between the value of goods produced (GDP) and the payments to the factors that produced the goods (particularly if inputs are purchased on credit).

Contents

Gross National Product

GNP Top 10 (2004) (currency exchange rate)
Country GNP ($ mill)
1 United States $10,945,792
2 Japan $4,389,791
3 Germany $2,084,631
4 United Kingdom $1,680,300
5 France $1,523,025
6 China $1,417,301
7 Italy $1,242,978
8 Canada $756,770
9 Spain $698,208
10 Mexico $637,159
Source: World Bank [1] (http://www.worldbank.org/data/databytopic/GNI.pdf)

Gross National Product (GNP) is the total value of final goods and services produced in a year by domestically owned factors of production. The International Bank for Reconstruction and Development (IBRD, in Romance languages: BIRD), better known as the World Bank, is an international organization whose original mission was to finance the reconstruction of nations devastated by WWII. Now, its mission has expanded to fight poverty by means of financing states. ... In accounting, a good describes a physical product capable of being delivered to a purchaser and involves the transfer of ownership from seller to customer. ... Services are: plural of service Tertiary sector of industry IRC services Web services the name of a first-class cricket team in India This is a disambiguation page — a navigational aid which lists other pages that might otherwise share the same title. ...


Final goods are goods that are ultimately consumed rather than used in the production of another good. For example, a car sold to a consumer is a final good; the components such as tires sold to the car manufacturer are not; they are intermediate goods used to make the final good. The same tires, if sold to a consumer, would be a final good. Only final goods are included when measuring national income. If intermediate goods were included too, this would lead to double counting; for example, the value of the tires would be counted once when they are sold to the car manufacturer, and again when the car is sold to the consumer. A small variety of cars, the most popular kind of automobile. ... In economics, consumers are individuals or households that consume goods and services generated within the economy. ...


Only newly produced goods are counted. Transactions in existing goods, such as second-hand cars, are not included, as these do not involve the production of new goods.


Income is counted as part of GNP according to who owns the factors of production rather than where the production takes place. For example, in the case of a German-owned car factory operating in the US, the profits from the factory would be counted as part of German GNP rather than US GNP because the capital used in production (the factory, machinery, etc.) is German owned. The wages of the American workers would be part of US GNP, while the wages of any German workers on the site would be part of German GNP. Income, generally defined, is the money that is received as a result of the normal business activities of an individual or a business. ... Profit is defined as the residual value gained from business operations. ...


Gross Domestic Product

GDP Top 10 (2004) (currency exchange rate)
Country GDP ($ mill)
1 United States 10,435,284
2 China 5,409,852
3 Japan 4,326,444
4 Germany 2,400,655
5 United Kingdom 1,794,858
6 France 1,747,973
7 Italy 1,465,895
8 Canada 958,390
9 Spain 836,100
10 Mexico 626,888
Source: World Bank [2] (http://www.worldbank.org/data/databytopic/GDP.pdf)

Gross Domestic Product (GDP) is the total value of final goods and services produced within a country's borders in a year. The International Bank for Reconstruction and Development (IBRD, in Romance languages: BIRD), better known as the World Bank, is an international organization whose original mission was to finance the reconstruction of nations devastated by WWII. Now, its mission has expanded to fight poverty by means of financing states. ...


GDP counts income according to where it is earned rather than who owns the factors of production. In the above example, all of the income from the car factory would be counted as US GDP rather than German GDP.


To convert from GNP to GDP you must subtract factor income receipts from foreigners that correspond to goods and services produced abroad using factor inputs supplied by domestic sources. To convert from GDP to GNP you must add factor input payments to foreigners that correspond to goods and services produced in the domestic country using the factor inputs supplied by foreigners.


GDP is a better measure of the state of production in the short term. GNP is better when analysing sources and uses of income.


Gross Value Added

The Gross value added is

 GDP - taxes on products + subsidies on products = GVA 
 GVA + taxes on products - subsidies on products = GDP 

Depreciation and Net National Product

Not all of GNP is available to produce final goods and services - part of it represents output that is set aside to maintain the nation's productive capacity. Capital goods, such as buildings and machinery, lose value over time due to wear and tear and obsolescence. Depreciation measures the amount of GNP that must be spent on new capital goods to offset this effect. Declining-balance depreciation of a $50,000 asset with $6,500 salvage value over 20 years. ...


In the Income Approach:

  • Net National Product (NNP) is GNP minus depreciation
  • Net National Income (NNI) is NNP minus indirect taxes
  • Personal Income (PI) is NNI minus retained earnings, corporate taxes, transfer payments, and interest on the public debt
  • Personal Disposable Income (PDI) is PI minus personal taxes, plus transfer payments.

no C = personal consumption
PDI = personal disposable income
TP = personal taxes paid
TPP = personal transfer payments received from governments
PI = personal income
RE = retained earnings
TC = corporate taxes
TPC = corporate transfer payments from governments
IG = interest on the public debt
NNI = net national income
TIN = indirect taxes
NNP = net national product
D = depreciation
GNP = gross national product

S + C = PDI
S + C + TP - TPP = PI
S + C + TP - TPP + RE + TC - TPC - IG = NNI
S + C + TP - TPP + RE + TC - TPC - IG + TIN = NNP
S + C + TP - TPP + RE + TC - TPC - IG + TIN + D = GNP

Real and nominal values

Nominal GNP measures the value of output during a given year using the prices prevailing during that year. Over time, the general level of prices rise due to inflation, leading to an increase in nominal GNP even if the volume of goods and services produced is unchanged.


Real GNP measures the value of output in two or more different years by valuing the goods and services adjusted for inflation. For example, if both the "nominal GNP" and price level doubled between 1995 and 2005, the "real GNP" would remain the same. For year over year GNP growth, "real GNP" is usually used as it gives a more accurate view of the economy.


National income and welfare

GNP per person is often used as a measure of people's welfare. Countries with higher GNP often score highly on other measures of welfare, such as life expectancy. However, there are serious limitations to the usefulness of GNP as a measure of welfare: Life expectancy is the most likely number of years remaining for a living being (or the average for a class of living beings) of a given age to live. ...

  • Measures of GNP typically exclude unpaid economic activity, most importantly domestic work such as childcare. This can lead to distortions; for example, a paid childminder's income will contribute to GNP, whereas an unpaid mother's time spent caring for her children will not, even though they are both carrying out the same economic activity.
  • GNP takes no account of the inputs used to produce the output. For example, if everyone worked for twice the number of hours, then GNP might roughly double, but this does not necessarily mean that workers are better off as they would have less leisure time. Similarly, the impact of economic activity on the environment is not directly taken into account in calculating GNP.
  • Comparison of GNP from one country to another may be distorted by movements in exchange rates. Measuring national income at purchasing power parity can help to overcome this problem.
  • GNP does not take into account many factors that may be important to quality of life, such as the quality of the environment and security from crime. This can lead to distortions - for example, spending on cleaning oil spill is included in GDP, but the negative impact of the spill on well-being are not taken into account.

Because of this, other measures of welfare such as the Index of Sustainable Economic Welfare (ISEW) and Genuine Progress Indicator have been suggested. In economics, purchasing power parity (PPP) is a method used to calculate an alternative exchange rate between the currencies of two countries. ... The Index of Sustainable Economic Welfare is an economic indicator intended to replace the Gross domestic product. ... The Genuine Progress Indicator (GPI) is a concept in green economics and welfare economics that has been suggested as a replacement metric for gross domestic product (GDP) as a metric of economic growth. ...


National accounting formulas (expenditure approach)

 C = Personal consumption expenditures I = Gross private domestic investment G = Government consumption expenditures X = Net exports of goods and services M = Net imports of goods and services NR = Net income from assets abroad (net income receipts) CC = Consumption of fixed capital IBT = Indirect business taxes 
 GDP = C + I + G + (X - M) GNP = C + I + G + (X - M) + NR NI = C + I + G + (X - M) + NR - CC - IBT 

United States income and output

To give an example of the components and their size. ([3] (http://www.federalreserve.gov/Releases/Z1/))

National income and output (Billions of dollars)
Period Ending 2003
Gross national product 11,059.3
Net U.S. income receipts from rest of the world 55.2
U.S. income receipts 329.1
U.S. income payments 273.9
Gross domestic product 11,004.1
Private consumption of fixed capital 1,135.9
Government consumption of fixed capital 218.1
Statistical discrepancy 25.6
National Income 9,679.7

Measures of national income and output are used in economics to estimate the value of goods and services produced in an economy. ... For GDP in neuroscience see Giant depolarizing potentials. ... Consumption of fixed capital (CFC). ... Measures of national income and output are used in economics to estimate the value of goods and services produced in an economy. ...

External links

  • GVA - Gross Value Added (http://www.tbr.co.uk/consultancy/projects/one_gva/)

  Results from FactBites:
 
Measures of national income and output - Wikipedia, the free encyclopedia (1358 words)
To convert from GNP to GDP you must subtract factor income receipts from foreigners that correspond to goods and services produced abroad using factor inputs supplied by domestic sources.
Depreciation measures the amount of GNP that must be spent on new capital goods to offset this effect.
GNP does not take into account many factors that may be important to quality of life, such as the quality of the environment and security from crime.
DEPweb: GNP per Capita Text 1 (301 words)
Countries with a GNP per capita in 1998 of $9,361 or more are described as high income, between $761 and $9,360 as middle income, and $760 or less as low income.
Knowing a country’s GNP per capita is a good first step toward understanding the country’s economic strengths and needs, as well as the general standard of living enjoyed by the average citizen.
A country’s GNP per capita tends to be closely linked with other indicators that measure the social, economic, and environmental well-being of the country and its people.
  More results at FactBites »

 
 

COMMENTARY     


Share your thoughts, questions and commentary here
Your name
Your comments

Want to know more?
Search encyclopedia, statistics and forums:

 


Press Releases |  Feeds | Contact
The Wikipedia article included on this page is licensed under the GFDL.
Images may be subject to relevant owners' copyright.
All other elements are (c) copyright NationMaster.com 2003-5. All Rights Reserved.
Usage implies agreement with terms, 1022, m