Economics -

GDP & GNP

K r i s O ’ N e i l l

&

A a r o n B y r n e

(A)

i. Gross Domestic Product – GDP

ii. Real GDP

iii. GNP

iv. Per Capita GDP

v. Net Factor Income

(B)

vi. Limitations of GDP

vii. Economic Effects of the Black Market

(C)

Global Statistics

Contents

GDP is “one of the primary indicators used to gauge

the health of a country’s economy” (Investopedia, 2009)

GDP indicates the size of an economy – It represents

all goods and services produced over a certain period

GDP is usually compared to figures from the previous

year in an individual economy

Gross Domestic ProductQ u e s t i o n 1 . ( A ) ( i )

Kris O’Neill

Real GDP is “an inflation-adjusted measure that reflects the

value of all goods and services produced in a given year

expressed in a base price” (Investopedia, 2013)

Real GDP takes into account changes in price level –

providing more accurate figures

E.g. Ireland in 2005 – the Nominal GDP = €100 bill – Due to

increased level of prices from 2001-2005 the Real GDP = €90

bill

Real GDP( A ) ( i i )

Kris O’Neill

GNP and GDP are closely related – the difference is

that “GNP is the total value of all goods and services

produced plus the income earned minus the income of

non-residents” (InvestorWords, 2013)

The GNP measures the value of goods and services

that all citizens produce regardless of their location

GNP is a one measure of the condition of an economy

Gross National Product( A ) ( i i i )

Kris O’Neill

Per Capita GDP is a measure of the GDP of a country

divided by the number of people in the country

Per Capita GDP is especially useful for comparing one

country to another with regards to performance

It gives a good idea of the spending power per person

in one country

Per Capita GDP( A ) ( i v )

Kris O’Neill

Net Factor Income represents the difference

between payments received from the foreign sector

by citizens and payments made to foreigners who

may be employed to make a good or provide a

service

Net Factor Income is the difference between GDP

and GNP in a country

Net Factor Income( A ) ( v )

Kris O’Neill

Limitations of GDP

(B)

i. Limitations of GDP

ii. Economic Effects of the Black Market

Aaron Byrne

An environmentally damaging practice that can diminish a natural resource thus negating the continued use or availability of that resource.E.G 1.1. China fishing industry- One of the largest fishing

industries in the world.2. 2005 – Aquaculture harvest was 32.4million tonnes.3. Exports valued at €5.62billion4. UN FAO – estimated 70% of the fish population is fully

used or in crisis.

1. Unsustainable practises

Aaron Byrne

E.G 2. Fossil fuel consumption

1. Limited supply2. Mass consumption of cheap fossil fuels3. Saudi Arabia – worlds largest oil producer approaching

end of production4. Replenishment rate of fossil fuels takes millions of

years

1. Unsustainable practises

Aaron Byrne

32,400,000-22,680,000 9,720,000 tonnes

China fishing industry€5,620,000,000€-3,930,000,000€1,690,000,000

-70%

Aaron Byrne

The sum of all goods and services which are produced

by a country in a given period of time. Bad composition of GDP – how diversified the

production within an economy is.E.G 1.1. Saudi Arabia 2009: Agriculture – 3.2%

Services – 36.4% Industry – 60.4%

2. Petroleum & petroleum products made up 90% of total exports.

2. Bad composition of GDP

Aaron Byrne

E.G 2.1. Mozambique 2007: Industry – 8%

Services – 15% Agriculture – 77%

2. Main exports include: Cotton, sugar, cashews and citrus.

2. Bad composition of GDP

Aaron Byrne

Transactions which producers provide to people for free or at economically insignificant prices.E.G 1.1. Second hand sales – old equipment, vehicles,

un-used stock. E.g. Bus van = €25,000 – annual depreciation 20%

Value after 3 years = €10,000Sold for €9,500

3. Non-production transactions

Aaron Byrne

E.G 2.1. Transfer payment – social welfare,

unemployment benefits, pension.2. 2012 – 1.469million people in receipt of a

weekly welfare payment.3. 2012 expenditure - €20.774billion4. Decrease of 0.9% over 20115. Not counted as it is money transferred rather

than paid for products or services.

Aaron Byrne

The unequal distribution of household or individual income across the various participants in an economy.1. E.g. 70% of the total income is controlled by

20% of the population.2. Overall wealth of a country is primarily

determined by the larger income of the minority of the population.

4.Income Inequality

Aaron Byrne

E.G 1.1. Gini coefficent - measures degree of

inequality in distribution of income in a country.

2. 0=perfect equality, 1=perfect inequality3. 2011 EU average = 30.74. 2011 – Ireland rank 20 – 31.15. Norway rank 1 – 22.9

Aaron Byrne

E.G 2.Saudi Arabia 1. Oil industry 2012 - €218.80billion2. Population – 28million3. ¼ of population on or below poverty line4. Estimated 2-4million natives live on less than

€386.85 a month - €12.40 a day5. King Abdullah's personal fortune at €13.13bn

4.Income Inequality

Aaron Byrne

5. Population

China

20121. Population – 1.351

billion2. GDP – €6.00trillion 3. Per capita – €4442.42

Switzerland

20121. Population –

7.997million2. GDP – €461.09billion 3. Per capita – €57656.11

Aaron Byrne

Underground economy – any economic activity that takes place outside of government control.Annual cost Ireland - €6.1billionE.G 1.1. Construction industry – cash only/cash in-

hand, no VAT2. Legitimate contractors- €250m to €500m

back into the industry

6. Black economy

E.G 2.1. Tobacco industry - €3 million per week from

illegal tobacco.2. 2011- 15% of smokers consuming illegal

cigarettes3. 2012- 95.6 million cigarettes seized valued at

€43.3 million

6. Black economy

Aaron Byrne

Unemployment1. Ireland 2013 – 13.3%2. 2012- 1.469million people in receipt3. 2012 social welfare - €20.774billion4. Budget 2014 – Job seekers allowance 14 Jan:

- No children, aged 18-24 = €100 per week-No children, aged 25 = €144 per week-Aged 26 increase = €188 per week

B. ii)Economic effects of black market in

Ireland

Aaron Byrne

5. High unemployment benefits – beneficial to

remain unemployed and continue to claim benefits, rather than work for a lower wage.

6. Nixers- people working off the books, cash in hand, continue to claim unemployment benefits.

B. ii)Economic effects of black market in

Ireland

Aaron Byrne

Lost tax revenueCigarette smuggling1. Annual government loss - €937million lost tax

revenue.2. Retailers - €537million, job losses.3. 32.8% discarded cigarette packs are non-

domestic.4. Ireland – largest smoker of smuggled

cigarettes in entire EU 2012

B. ii)Economic effects of black market in

Ireland

5. Ireland 2013 – most expensive price per pack

of 20 cigarettes in Europe.6. Retail price - €9.50 per pack7. Collected tax - €7.728. Illegal cigarettes purchased - €0.50c per pack9. Selling price - €4.5010.Difference - €5.00

B. ii)Economic effects of black market in

Ireland

Aaron Byrne

World Wide Statistics

(C)

Global Statistics

Kris O’Neill

 

IRELAND

U.K. USA CANADA

Republic of Congo

China Moldova

  €  €  €  €  €  €  € 

TOTAL GDP

(2012)

152.27

Billion

 1.76

Trillion

 11.34

Trillion

1.32

Trillion

12.92

Billion

5.95

Trillion

 

5.25

Billion

GDP PER CAPITA(2012)

€

33,151.3

1 P/P

€

27,856.5

5

P/P

 €

36,138.6

3 P/P

€

37,768.6

9 P/P

€

196.71

P/P

€

4,405.48

P/P

€

1,473.99

P/P

GDP GROWTH

RATE (MOST

RECENT)(2012)

0.9%  0.3% 2.2%  1.7%  3.8%  7.8% -0.8% 

Q u e s t i o n 1 . ( C )

Kris O’Neill

Q u e s t i o n 1 . ( C )

UNEMPLOY -

MENT(2013)

%

 

13.3

%

7.70

%

 

7.30

%

6.90

% 

 

50.30

%

4.10

% 

 

4.70

%

INFLATION(2013)

%0.20

% 

 

2.70

%

1.50

% 

1.10

% 

1.43

% 

 

3.10

%

 

3.90

%

UN HDI RANKING

(2012)

 #7

of

#186

#26

of

#186

#3 

of

#18

6

#11 

of

#186

 #186

of

#186

 #13

of

#186

#113

of

#186

 IRELAN

DU.K. USA CANADA Republic

of CongoChina Moldova

Kris O’Neill

References(i) GDP

• Investopedia. (2009). What is GDP and why is it so important?.

Available: http://www.investopedia.com/ask/answers/199.asp.

Last accessed 25/10/2013.

(ii) Real GDP

• Investopedia. (2013). Real Gross Domestic Product (GDP).

Available: http://www.investopedia.com/terms/r/realgdp.asp.

Last accessed 25/10/2013.

(iii) GNP

• InvestorWords. (2013). What is GNP?.

Available: http://www.investorwords.com/2186/GNP.html.

Last accessed 25/10/2013.

• Central Statistics Office. (2013). What are GDP and GNP?. Available: http://www.cso.ie/en/studentscorner/nationalaccounts/whataregdpandgnp/. Last accessed 25/10/2013.

Quest ion 1 . ( A )

Kris O’Neill

References(iv) Per Capita GDP

• Investopedia. (2013). Per Capita GDP.

Available: http://www.investopedia.com/terms/p/per-capita-gdp.asp. Last accessed

31/10/2013.

(v) Net Factor Income

• Dictionary, Business. (2013). What is Net Foreign Factor Income?.

Available: http://www.businessdictionary.com/definition/net-foreign-factor-

income.html. Last accessed 31/10/2013.

Quest ion 1 . ( A )

Kris O’Neill

References

• Moultry, L . (2013). The Definition of Sustainable Business Practices.

Available: http://smallbusiness.chron.com/definition-sustainable-business-practices-

18748.html.

Last accessed 31st Oct 2013.

• National Geographic. (1995). Diminishing Returns.

Available: http://ngm.nationalgeographic.com/ngm/0704/feature1/legacy1.html.

Last accessed 31st Oct 2013.

• Quain, S. (2013). The composition of GDP.

Available: http://www.ehow.com/info_8562133_composition-gdp.html.

Last accessed 31st Oct 2013.

Quest ion 1 . ( B )

Aaron Byrne

References

• Welfare. (2012). Statistical Information on Social Welfare Services 2012 is

published.

Available: http://www.welfare.ie/en/pressoffice/Pages/pr110713.aspx.

Last accessed 31st Oct 2013.

• Sullivan, K. (2013). Saudi Arabia's riches conceal a growing problem of poverty.

Available: http://www.theguardian.com/world/2013/jan/01/saudi-arabia-riyadh-

poverty-inequality.

Last accessed 31st Oct 2013.

.

Quest ion 1 . ( B )

Aaron Byrne

References

• Irish Construction. (2013). Budget 2014 shadow economy reforms could be worth

€250-€500m to the building sector.

Available:

http://www.irishconstruction.com/budget_2014_shadow_economy_reforms_could_be_wo

rth_250_500m_to_the_building_sector.PAGE3394.html.

Last accessed 31st Oct 2013.

• The journal. (2012). Booming black economy killing small business.

Available: http://www.thejournal.ie/booming-black-economy-killing-small-business-

533041-Jul2012/.

Last accessed 31st Oct 2013

.

Quest ion 1 . ( B )

Aaron Byrne

References

• Citizen Information. (2013). Job seekers allowance.

Available:http://www.citizensinformation.ie/en/social_welfare/social_welfare_payments/

unemployed_people/jobseekers_allowance.html.

Last accessed 2013.

• Youtube - Economics: Off the Books: The Underground Economy -

http://www.youtube.com/watch?v=39SH1Y4L0k8

• Youtube- (Macro) Episode 20: GDP - http://www.youtube.com/watch?

v=yUiU_xRPwMc

• Youtube - LImitations of GDP - http://www.youtube.com/watch?v=_dye0kH4idE

.

Quest ion 1 . ( B )

Aaron Byrne

Ireland GDP

• The World Bank. (2012). GDP (current US$).

Available: http://data.worldbank.org/indicator/NY.GDP.MKTP.CD.

Last accessed 25/10/2013.

Per Capita GDP

• The World Bank. (2012). GDP per capita (current US$).

Available: http://data.worldbank.org/indicator/NY.GDP.PCAP.CD.

Last accessed 25/10/2013.

GDP growth rate

• The World Bank. (2012). GDP growth (annual %).

Available: http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG.

Last accessed 25/10/2013.

Unemployment

ReferencesQuest ion 1 . ( C )

Kris O’Neill

• Central Statistics Office. (2013). Live Register.

Available:http://www.cso.ie/en/media/csoie/releasespublications/documents/

latestheadlinefigures/lreg_sep2013.pdf.

Last accessed 25/10/2013.

Inflation

• Trading Economics. (2013). Unemployment Rate.

Available: http://www.tradingeconomics.com/country-list/unemployment-rate.

Last accessed 25/10/2013.

HDI Ranking

• Outreach. (2012). Human Development Index Trends. HDI Trends. 1 (2), 148-151.

ReferencesQuest ion 1 . ( C )

Kris O’Neill