Gross National Product (GNP)

7 Key excerpts on "Gross National Product (GNP)"

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  eBook - ePub

  The Trader's Guide to Key Economic Indicators

  • Richard Yamarone(Author)
  • 2012(Publication Date)
  • Bloomberg Press

    (Publisher)

  CHAPTER 1 Gross Domestic Product

  Economics has received a bad rap. In the mid-nineteenth century, the great Scottish historian Thomas Carlyle dubbed this discipline “the dismal science,” and jokes abound on Wall Street about economists being more boring than accountants. But truth be told, there is nothing more exciting than watching the newswire on a trading floor of a money-center bank minutes ahead of the release of a major market-moving economic report. One of the top excitement generators is the report on gross domestic product (GDP)—an indicator that is a combination of economics and accounting.

  Economists, policy makers, and politicians revere GDP above all other economic statistics because it is the broadest, most comprehensive barometer available of a country’s overall economic condition. GDP is the sum of the market values of all final goods and services produced in a country (that is, domestically) during a specific period using that country’s resources, regardless of the ownership of the resources. For example, all the automobiles made in the United States are included in GDP—even those manufactured in U.S. plants owned by Germany’s BMW and Japan’s Toyota. In contrast, gross national product (GNP) is the sum of the market values of all final goods and services produced by a country’s permanent residents and firms regardless of their location—that is, whether the production occurs domestically or abroad—during a given period. Baked goods produced in Canada by U.S. conglomerate Sara Lee Corporation, for example, are included in U.S. GNP, but not in U.S. GDP.

  GDP is a more relevant measure of U.S. economic conditions than GNP, because the resources that are utilized in the production process are predominantly domestic. There are strong parallels between the GDP data and other U.S. economic indicators, such as industrial production and the Conference Board’s index of coincident indicators (the coincident index), which will be explored in later chapters.

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  Economic Indicators for Professionals

  Putting the Statistics into Perspective

  • Charles Steindel(Author)
  • 2018(Publication Date)
  • Routledge

    (Publisher)

       A sophisticated reader may note that, unlike the situation in Petty’s day, in modern nations the income earned from a significant degree of a nation’s production may accrue to foreign owners, while domestic residents may earn income from activities located in foreign nations. GDP is a measure of income-producing economic activity within the borders of the United States. The workers and businesses who produce GDP include foreigners working in the US and foreign-owned businesses in the US, while income earned overseas by Americans is not counted in GDP. Gross National Product (GNP), the older concept headlined before the 1990s, is an aggregate measure of economic activity that produces income for American individuals and businesses, no matter where on the globe that activity occurs. Income earned by foreigners from production in the US is excluded from GNP.

  Also, as a matter of technical economics, the equality of sales and income is not an example of Say’s Law. The latter is the proposition that the quantity of items produced always matches the quantity of products demanded. A major point of difference between Keynesian and non-Keynesian economists is that the former believe that Say’s Law need not always hold in a monetary economy.

  12      All the services mentioned are used, and purchased, by retailers whether or not the actual item in the store was made by a domestic manufacturer. The reality is that sales of imported items will contribute to US GDP through the need to use domestically produced intermediate services to supply them to US customers (Steindel, 2004).

  13      As noted, Petty’s original estimates were based on rudimentary information on incomes, and he was not especially concerned with changes in the aggregates from one year to another. Snapshots of the size and structure of an economy certainly have their uses, but in the modern US the greater interest is often in the near-term evolution of the economy, putting the focus on changes, or growth rates, of economic statistics.

  14      Input-output tables contain estimates of the purchases sectors make from other sectors to produce the goods and services they sell. These figures allow BEA to estimate, for example, how much wheat was purchased from farmers this period to bake today’s bread. Input-output tables are derived from detailed data on business spending and sales collected in economic censuses. The economic censuses are conducted at five-year intervals. BEA infers how the relationships across sectors evolve between those benchmark years, and have changed since the last census year, in order to make the needed corrections to aggregate measures of sales, which are available annually and quarterly. BEA’s input-output tables can be found at https://bea.gov/iTable/index_industry_io.cfm

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  The Trader's Guide to Key Economic Indicators

  With New Chapters on Commodities and Fixed-Income Indicators

  • Richard Yamarone(Author)
  • 2010(Publication Date)
  • Bloomberg Press

    (Publisher)

  1

  Gross Domestic Product

  ECONOMICS HAS RECEIVED A BAD RAP. In the mid-nineteenth century, the great Scottish historian Thomas Carlyle dubbed this discipline “the dismal science,” and jokes about economists being more boring than accountants abound on Wall Street. But truth be told, there is nothing more exciting than watching the newswire on a trading floor of a money-center bank minutes ahead of the release of a major market-moving economic report. One of the top excitement generators is the report on gross domestic product (GDP)—an indicator that is a combination of economics and accounting.

  Economists, policy makers, and politicians revere GDP above all other economic statistics because it is the broadest, most comprehensive barometer available of a country’s overall economic condition. GDP is the sum of the market values of all final goods and services produced in a country (that is, domestically) during a specific period using that country’s resources, regardless of the ownership of the resources. For example, all the automobiles made in the United States are included in GDP—even those manufactured in U.S. plants owned by Germany’s BMW and Japan’s Toyota. In contrast, gross national product (GNP) is the sum of the market values of all final goods and services produced by a country’s permanent residents and firms regardless of their location—that is, whether the production occurs domestically or abroad—during a given period. Baked goods produced in Canada by U.S. conglomerate Sara Lee Corporation, for example, are included in U.S. GNP, but not U.S. GDP.

  GDP is a more relevant measure of U.S. economic conditions than GNP, because the resources that are utilized in the production process are predominantly domestic. There are strong parallels between the GDP data and other U.S. economic indicators, such as industrial production and the Conference Board’s index of coincident indicators (the coincident index), which will be explored in later chapters.

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  Farewell to China's GDP Worship

  • Jinzao Li(Author)
  • 2017(Publication Date)
  • WSPC

    (Publisher)

  As the most comprehensive economic indicator, GDP is connected to a number of economic and even non-economic indicators. Judging from the formation of GDP as the most comprehensive indicator, the indicators with the closest relationships to GDP are: net domestic product (NDP), gross national income (GNI) and gross disposable income (GDI). Furthermore, GDP is also closely connected to such indicators as price, inflation rate, fiscal revenue and credit.

  i.GDP, NDP, GNI and GDI

  GDP refers to the final products at market prices produced by all resident units in a country (or a region) during a certain period of time calculated at market price. Gross domestic product has three forms, namely, value, income and products. GDP in its value form refers to the difference between the total value of all goods and services produced by all resident units during a certain period of time and the total input value of goods and services of non-fixed assets within the same period of time; in other words, it is the sum of the value-added of all resident units. GDP from the perspective of income includes the primary income generated by all resident units within a fixed period of time and distributed to resident and non-resident units. GDP from the perspective of products refers to the value of end-use goods and services by all resident units minus the value of imports of goods and services during a given period of time.16

  Net domestic product (NDP) is the net value of all the final products and labour services produced by a country during a given period of time calculated at market rates. The calculation formula is: NDP = GDP – Depreciation

  Gross national income or GNI, also known as gross national product (GNP), refers to the final result of the primary distribution of the income created by all resident units of a country (or a region) during a certain period of time. The value-added created by resident units of a country engaged in production activities is distributed, during the primary distribution, mainly to resident units of that country, while part of it is distributed to non-resident units in the form of production tax and import duties (minus subsidies to production and import), compensation for workers and property income. In the meantime, a part of the value-added created abroad is distributed to resident units of the country in the form of production tax and import duties (minus subsidies to production and import), compensation for workers and property income. The concept of GNI is thus developed, which equals GDP plus the net factor income from abroad. Unlike GDP, which is based on a concept of production, GNP is based on a concept of income.17

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  The Trader's Guide to the Euro Area

  Economic Indicators, the ECB and the Euro Crisis

  • David J. Powell(Author)
  • 2013(Publication Date)
  • Bloomberg Press

    (Publisher)

  Chapter 2

  Gross Domestic Product

  GDP is the most commonly cited comprehensive indicator of economic activity. It is the total market value of the goods and services produced within a nation or, in the case of the euro area, a monetary union. It can also be described as the total income of the geographic area.

  The first word of the term – gross – indicates that depreciation of equipment and factories used in the production process is excluded from the calculation.1 For example, the decline in the value of an aging computer is ignored in this measure of national output.

  The second word of the term – domestic – indicates the inclusion of all production within the region’s borders irrespective of the country of origin of the producer.2 For example, if a Mercedes is produced in a plant constructed by the German company in the U.S., the car is included in U.S. GDP and excluded from German GDP. If the car is produced in Germany and shipped to the U.S., it is included in German GDP and excluded from U.S. GDP.

  Three methods of measuring GDP exist: expenditure, output and income. In theory, all three methods should produce the same figure. In practice, measurement problems normally lead to discrepancies.

  The Expenditure Approach

  The expenditure approach is based on the final or end use of the produced goods and services. This method has historically been used most frequently by national statistical agencies. In a report from 1996 of 18 member countries, the OECD calculated that all of them reported GDP using the expenditure approach. Sixteen of them also tallied the figure using the output method and 10 used the income approach as well.3 These numbers have since risen to 18, 17 and 16, respectively.4

  The accounting identity used to calculate GDP under the expenditure approach states that GDP equals consumption plus investment plus net exports. Consumption is broken down into private consumption and government consumption and investment consists of gross fixed capital investment and the change in inventories. The sum of consumption and investment equals domestic demand. Net exports equals exports minus imports.

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  Foundations of Macroeconomics

  Its Theory and Policy

  • Frederick S. Brooman(Author)
  • 2017(Publication Date)
  • Routledge

    (Publisher)

  23 Disposable Personal Income still includes contributions to private pension schemes, which may be a condition of employment and therefore compulsory. Also, individuals have fixed commitments, such as the repayment of savings and loan mortgages and installment credit notes, which further reduce the part of their incomes over which they have complete and immediate discretion in the short run. When all possible outlays of this sort have been taken away, the remainder may be called “discretionary income” – although this is not official usage and no estimate of it is provided in the U.S. national income statistics.

  As a companion concept to Disposable Personal Income, it may be useful to have the concept of Disposable Corporate Income, i.e., the income remaining at the discretion of corporate managers once dividends and direct taxes have been paid. Table 2.5 shows this to have been $25.2 billion in 1967. Finally, in the public sector, a total of $166.8 billion remained at the disposal of government authorities after the payment of the interest on the public debt and transfer payments to persons.24

  9. Summary of the Principal

  To conclude this chapter, it may prove useful to summarize the definitions of the magnitudes that have been described and to set forth the relationships between them. For convenience in later argument, a set of symbols is adopted for these aggregates; the symbols are conventional abbreviations.

  Gross National Product (GNP) is the market value of the output of goods and services produced within the nation’s economy. Net National Product (NNP) is GNP less depreciation and other allowances for the consumption of capital goods. NNP “at factor cost” is NNP less indirect taxes and other minor nonfactor charges against output. Often, in the discussion to follow, the distinction between GNP, NNP, and NNP at factor cost is not important; at these times, reference will be made simply to National Product or Output, which will be represented by the symbol pQ where Q is the national output in physical units and p is the price level.

  Gross National Expenditure (GNE) is the sum of the expenditures that purchase the GNP, and therefore GNP ≡ GNE.25 It consists of consumers’ expenditure (C) , gross private domestic investment (I), government expenditures (G) and the difference between imports (M) and exports (E

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  Getting the Measure of Money: A Critical Assessment of UK Monetary Indicators

  A Critical Assessment of UK Monetary Indicators

  • Anthony J. Evans(Author)
  • 2018(Publication Date)
  • London Publishing Partnership

    (Publisher)

  Indeed we can take the approach that some forms of aggregate measures might be useful (whether for policymakers, economic forecasters or general business managers), but have more nuanced gripes with the specific composition of GDP. While GDP is a good estimate of national consumption of final goods, it is the desire to dig deeper into the value of intermediate goods that necessitates an alternative. 114 Beyond GDP Perhaps one reason why economists and policymakers seem so wedded to GDP is a lack of alternatives. This section attempts to destroy this view by presenting, and critically assessing, several. In particular, we will survey Final Sales, Net National Product (NNP) and (Net) Private Product Remaining (PPR). The subsequent section will be devoted to a discussion of Gross Domestic Expenditure (GDE) and Gross Output (GO). Selgin (2012) advocates the use of Final Sales of Domestic Product instead of Nominal GDP and there are several advantages. By subtracting inventories, it reveals the amount of spending that takes place in the specific period of observation. By including imports instead of exports, and stripping out inventory accumulation, we see ‘what citizens enjoy as opposed to what they produce’ (Ranson 2015: 1). Another way of putting this is that it highlights new production as opposed to previous production (in the form of changing inventories). This gives a narrower measure than GDP. Similarly, NNP subtracts depreciation. 115 The downside of this is that the measure of depreciation is an estimate, as opposed to an actual transaction. Therefore, although it may be an important part of the macroeconomic picture, it doesn’t tie in closely with monetary ­theory. 116 In addition, these estimates are based on accounting rather than economic definitions

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