Gross National Product (GNP)
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Vincent Dignos BSE – Social Studies 2016 MEASURING NATIONAL OUTPUT
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Transcript of Gross National Product (GNP)
Vincent DignosBSE – Social Studies
2016
MEASURINGNATIONAL
OUTPUT
In this module, you will:1. Examine the composition of national income (or
national output);2. Study the concepts of Gross National Product
(GNP) and Gross Domestic Product (GDP), and dif -ferentiate between the two measures;
3. Look at the two approaches to measuring GDP and GNP;
4. Learn the differences between real and nominal output: and
5. Learn what economists use to determine whether the national economy is growing or not.
Different sectors of the economy:
1. Households2. Firms3. Government4. Trade sectors
GROSS NATIONAL PRODUCT
- The market value of the final goods and services produced in a given year.
- The economy produces all sorts of good and services every year. All these commodities are accounted for the country’s GNP.
GROSS DOMESTIC PRODUCT
- Gross Domestic Product (GDP) measures the value of goods and services produced by country’s borders.
APPROACHES TO MEASURING NATIONAL OUTPUT
1. Expenditure Approach2. Income Approach3. Industrial Origin
The Expenditure Approach
GNP = C + I + G + (X – M) + Net Factor Income from Abroad + Statistical Discrepancy
C= Consumption expenditures I = Investment expenditures G= Government expenditures(X-M) = Net exports
The Income ApproachGNP = PI + GI + CI + IT – S + D
PI = Personal Income a. salaries and wages b. profits and dividends c. rents d. interestGI = Government IncomeCI = Corporate Income IT = Indirect Taxes S = Subsidies D = Depreciation
GNP by INDUSTRIAL ORIGIN
Agriculture, Fisheries and Forestry + Industry + Services = GDP by Industrial Origin GDP + NFIA = GNP
CURRENT vs CONSTANT OUTPUT
How do we know that GNP is rising?
When GNP rises, it may be because of two reason:
- quantities are rising- prices are rising
CURRENT vs CONSTANT OUTPUT
Current GNP – is GNP without adjusting for changes in prices as they rise every year.
Real GNP – refers to GNP while keeping prices constant.
CURRENT vs CONSTANT OUTPUT
How is this done?How do we make prices constant when they rise every year?
CURRENT vs CONSTANT OUTPUT
Year Current Price Quantity Value(price X quantity)
2000 P50 10,000 P500,0002001 P51 10,000 P510,0002002 P52 10,000 P520,000
1.1 Price and Quantity of bibingka production (In current prices)
1.2 Value of production keeping price constant (using base year)Year Current Price Quantity Value
(price X quantity)2000 P50 10,000 P500,0002001 P50 10,000 P500,0002002 P50 10,000 P500,000
CURRENT vs CONSTANT OUTPUTPrice Index 100
Year Computation Price Index
2000 100 100
2001 100 102
2002 100 104
CURRENT vs CONSTANT OUTPUT
- The example clearly show the differ-ence between nominal (or current) vale and real (constant) value.
- If real GNP rises, then we know that the quantities of commodities produced in a year have risen.
CURRENT vs CONSTANT OUTPUT
Year
GNP in Current Prices
GNP in Constant
Prices
GNP Growth
Rate198
5551,428 551,428 100.00
1990
1,071,433 716,929 149.45
1995
1,958,555 824,525 237.54
2000
3,566,059 1,037,856 343.60
GROWTH RATE
GNP Growth rate x 100
YearGNP in
Current PricesGNP in 1985
Constant PricesGNP Growth
RateNomi-
nalReal
2000 3,566,059 1,037,856 - - 2001 3,918,679 1,073,066 9.89% 3.39%2002 4,290,199 1,121,039 9.48% 4.47%
GROWTH RATEGNP Growth rate x 100
x 100
GNP Growth rate
x 100
GNP Growth rate
END
