Concept of Gdp, Gnp, Ppp

7/25/2019 Concept of Gdp, Gnp, Ppp

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Concept of GDP, GNP

and PPP


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MeaningGDP

Gross Domestic Product

GNP

Gross National Product

PPP

Purchasing Power Parity


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GDP

is the total market value of all final goods and services

produced within a country in a given time period usually a

calendar year.

GDPstands for Gross Domestic Product, the total worth

estimated in currency values of a nations production in a

given year, including service sector, research, anddevelopment. That translates to a sum of all industrial

production, work, sales, usiness and service

sector activity in the country.

GDP


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Gross Domestic Product can also e calculated on a per

capita !or per person" asis to give a relative e#ample of theeconomic development of nations.

$t is also considered the sum of value added at every stage of

production !the intermediate stages" of all final goods andservices produced within a country in a given period of time.

The most common approach to measuring and understanding

GDP is the e#penditure method%GDP = consumption + investment + (government spending)

+ (exports imports), or, GDP = C + I + G + (X-M)


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Methods for calculating GDP&. Production Method ' The value added created in all

the sectors of the economy.

(. )#penditure Method ' The sum of the domestic

spending on final goods !less domestic demand

satisfied y imports".

*. $ncome Method + The age, -ent, $nterest and

Profit $ncome generated y the domestic economy.


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)#penditure Method


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riticism of GDPGDP is perhaps the most widely used metric to measure

the health of economies. /ut some economists have argued that

GDP is a flawed metric ecause it does not measure the

economic well eing of society.

For example, it0s possile that GDP is going up

ut median income going down and poverty rate increasing.

GDP also does not measure environmental impact of growth,

nor sustainaility. 1ther important metrics include health of the

population, infant mortality rates, and malnutrition rates, none

of which are captured y GDP.


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GNPGross National Product%

is the market value of all final goods and services

produced y permanent residents of a country in a given

period of time

GNP = GDP + net factor income from abroad

GNP 2 $ncome earned y domestic residents


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3n estimated value of the total worth of

production and services, y citi4ens of a country, on

its land or on foreign land, calculated over the course

on one year.

)#penditure 3pproach to calculating GNP%

GNP = GDP + NR

NR = (Net income rom !ssets !"ro!d (Net Income

Receipts)).


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GNPstands for Gross National Product.

$n general terms, GNP means the total of all usiness

production and service sector industry in a country plus its gain

on overseas investment.

This gives a far more realistic picture than the income of

foreign nationals in the country as it is more reliale and

permanent in nature.

Gross National Product can also e calculated on a per

capita asis to demonstrate the consumer uying power of an

individual from a particular country, and an estimate of average

wealth, wages, and ownership distriution in a society.


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Applications of GDP and GNP

GDP and GNP figures are oth calculated on a per

capita asis to give a portrait of a country0s economic

development.

GDP !or Gross Domestic Product" may e compared

directly with GNP !or Gross National Product", to see the

relationship etween a country0s e#port usiness and local

economy

3 region0s GDP is one of the ways of measuring the si4e

of its local economy whereas the GNP measures the

overall economic strength of a country


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$ncrease in e#ports of a country will lead to increase in

oth GDP and GNP of the country. orrespondingly,

increase in imports will decrease GDP and GNP. 5owever,

sometimes increase in e#ports might only lead to increase

in GDP and not GNP.

).g. if Microsoft orporation has a &667 owned

susidiary in $ndia, and that office e#ports

89:( /illion worth of services out of $ndia, then 89:(/illion will e added to the GDP of $ndia. 5owever, it will

not e added to the GNP figure since the e#port is done y

a 89 company and not an $ndian company.


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Particulars GDP GNP

Stands for: Gross Domestic Product Gross National Product

Definition:

3n estimated value of the totalworth of a countrysproduction and services,within its oundary, y its

nationals and foreigners,calculated over the course onone year.

3n estimated value of the totalworth of production andservices, y citi4ens of a

country, on its land or onforeign land, calculated overthe course on one year.

Formula forCalculation:

GDP 2 consumption ;

investment ; !governmentspending" ; !e#ports

Concept of Gdp, Gnp, Ppp

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