What is Gross National Product (GNP)? Concepts of GDP, GNP, ND, NB. The ratio of GDP and GNP and methods for calculating them Gross domestic product and national income

Gross National Product (GNP)- one of the main macroeconomic indicators that give a general idea of the economic situation of the state. The term was first introduced by Simon Smith (Semyon Kuznets - a native of Pinsk, who later emigrated to the USA).

The essence of the concept can be represented as:

GNP = the value of all final products (goods and services at market prices) produced by a country (domestic producers only) + the amount of net income from abroad.

Please note that only the final, ready-to-eat product is summed up, and not the intermediate product. Operations for the redistribution of the produced product are not included in the calculation. Therefore, the indicator does not include:

sale of used goods, because their cost is already taken into account during the first sale;
the cost of what is produced and consumed within households (for example, what is grown in personal plots);
natural exchange between citizens;
purely financial transactions (trading securities, etc.);
pensions, other financial transactions not related to the production of goods and services;
turnover "shadow".

GNP is calculated for a certain period, usually a year.

It is determined in monetary terms, in national currency, or recalculated according to the established one into one of the “hard” currencies.

GNP is consonant with and, in fact, related to another common term - GDP (Gross Domestic Product). The difference is that it is determined on a territorial basis, while GNP is the sum of the results of the activities of national producers, regardless of their location. GNP can be obtained from GDP by subtracting the value of what foreign companies produce within the state and adding the results of activities of national enterprises abroad.

GNP can be calculated in three different ways:

by added value (production method) - by summing up all added values produced during the period;
by income (distribution method) - by adding income from rent, depreciation charges and indirect taxes;
by expenditure (end use) - by calculating the sum of household consumer spending, government spending (purchases), private domestic investment, net exports (exports minus imports).

Since the gross national product is a turnover indicator, i.e. the same value is for some an expense, for others an income, for others a result of production, its value does not depend on the calculation method.

Gross national product can be calculated in prices valid at the time of the study - Nominal GNP. Or taking into account price changes in the billing period - Real GNP. The amount by which Nominal GNP must be multiplied to obtain Real GNP is called the GNP Deflator.

The GNP deflator is the ratio of prices for goods and services in the period taken as the base period in relation to the calculation period.

GNP may be greater or less than GDP by the difference between the inflow and outflow of funds abroad. In cases where the income of non-residents within the country is greater than similar income received from the use of national factors abroad, GNP will be lower than GDP. This situation generally negatively characterizes the country’s economy and indicates an outflow of capital. The opposite situation is, as a rule, inherent in strong economic systems.

In the Republic of Belarus, as in many other countries, the difference between GDP and GNP is so small that it is often not taken into account.

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Gross domestic product- GDP is the total cost of production in the spheres of material production and the service sector, regardless of the nationality of enterprises located on the territory of a given country. GDP is calculated on a so-called territorial basis. Three calculation methods: 1) production - the amount of gross value added (which are grouped by industry or sector of activity); 2) end-use method - calculation as the sum of end-use components; 3) distribution - the amount of primary income (which is paid by production units (wages of employees, taxes)

Gross national product- GNP is the total value of the entire volume of products and services in both spheres of the national economy, regardless of the location of national enterprises (in the country or abroad). GNP is calculated on a national basis.

GNP can be calculated using one of two methods. End use method (by cost). When calculating GNP by expenses, the expenses of all economic agents using GNP, households, firms, the state and foreigners (expenses on our exports) are summed up. Total expenses can be broken down into several components:

GNP = C+ I+ G + NE,

where C is consumption; I- investments; G- government procurement; NE- net export.

Investments include the cost of goods purchased for future use. Government procurement is the total cost of goods and services purchased by government agencies (military equipment, construction and maintenance of schools, roads, maintenance of the army and government administration

Distribution method (by income)

When calculating GNP by income, all types of factor income are summed up, as well as depreciation charges and net indirect taxes on business, i.e. taxes minus subsidies. The following types of factor income are usually distinguished as part of GNP (the criterion is the method of generating income):

Remuneration (wages, bonuses, etc.);

Income of owners (income of unincorporated enterprises, small shops, farms, partnerships, etc.);

Rental income;

Corporate profits (remaining after wages and interest on loans);

Net interest (as the difference between interest payments by firms to other sectors of the economy and interest payments received by firms from other sectors - households, the state, excluding interest payments on government debt).

The main requirement when calculating GDP and GNP indicators is that all goods and services produced during the year are counted only once, i.e. so that the calculation takes into account only final products and does not take into account intermediate products that can be bought and resold many times.

Final products are goods and services that are purchased by consumers for final use rather than for resale.

National income

This is the value newly created during the year, characterizing what production in a given year added to the welfare of society. When calculating it, unlike GDP, depreciation, indirect taxes, and government subsidies are not included. There is a production and used ND. Production ND is the entire volume of newly created value of goods and services. Used ND - produced ND minus losses and foreign trade balance.

National wealth (NB). This is an indicator used to characterize the property situation of the country as a whole. To calculate income tax and net worth, use the balance sheet of assets and liabilities. The indicators at the beginning and at the end of the period are compared.

80 Aggregate demand and aggregate supply. Macroeconomic equilibrium

The term "aggregate demand" refers to the total amount of money that different sectors of the economy are willing to spend in a given period of time.

The composition of aggregate demand includes the following elements: C - household consumer expenditures; I - investment expenditures of the private sector; G - government procurement; HP is a net export. The majority of aggregate demand (50% of ND) is made up of household expenditures on consumer goods and services, i.e. element C, which is called consumption for short. Investment expenditures represent the demand of firms and households for investment goods (15-20% of GNP). Public procurement of goods and services is the government's expenses for paying for services (education, healthcare, etc.) and maintaining government officials (federal, regional, municipal) - 30% of the country's national income. Net exports are the difference between exports and imports.

Total purchases (total demand) depend on many factors. This includes the general level of prices in the country, the level of real national income, the value of accumulated property, state policy in the field of taxation, personal income, monetary, credit, etc., which determine the amount of taxes, interest rates, pensions, wages for employees of state-funded enterprises and organizations, expectations of firms and households, exchange rates, etc. Aggregate demand and its value can be depicted graphically using the aggregate demand curve. If we mark the price level (P) vertically and output (Y) horizontally, that is, GDP, then, taking different values of the price level and output, we can construct the aggregate demand curve AD (see Fig. 7.6).

Rice. 7.6 Aggregate demand curve

At the price level P1, the value of aggregate demand at point A will be equal to Y1; when prices fall to level P2, the value of aggregate demand will increase at point B to level Y2. Just as at the micro level there is an inverse relationship between the price of a product and the amount of demand for the product, so in macroeconomics there is an inverse relationship between the price level and the amount of aggregate demand. The aggregate demand curve AD is therefore downward sloping.

The explanation of the inverse relationship between the price level and the amount of aggregate demand is different from the explanation of the law of demand in microeconomics. Recall that in microeconomics the inverse relationship between the price of a product and the quantity demanded for a product was explained by the law of diminishing marginal utility, the substitution effect and the income effect (topic 3). At the macroeconomic level, it is impossible, for example, to explain the increase in aggregate demand by the substitution effect, since it is assumed that all prices fall. Or take the income effect. The demand curve for an individual good assumes constant income. In a macroeconomic environment, a decrease in the price level causes a decrease in income for both households and enterprises.

The downward-sloping nature of the aggregate demand curve is explained by the following effects:

wealth effect,

interest rate effect,

effect of import purchases.

The wealth effect is that when the price level increases, the real value of society's assets (wealth) decreases, that is, their purchasing power decreases. Aggregate supply (AS, aggregated supply) in economic theory is the sum of all final goods and services produced in a country, which firms are willing to offer on the market for a certain period of time at every possible price level.

The interest rate effect means that when the price level rises, the interest rate rises, which leads to a reduction in the amount of investment spending that is part of aggregate demand.

The effect of import purchases is that when the price level in the economy increases, net exports, which are part of aggregate demand, decrease

Cumulative offer

Aggregate demand can be represented as national income used and aggregate supply as national income produced.

The dependence of the real volume of national production (product) on the price level is called the aggregate supply curve.

The aggregate supply curve shows the relationship between total supply and the general price level in the economy.

The nature of the AS curve is also influenced by price and non-price factors. As with the AD curve, price factors change the quantity of aggregate supply and cause movement along the AS curve. Non-price factors cause the curve to shift to the left or right. Non-price supply factors include changes in technology, resource prices and volumes, taxation of firms and the structure of the economy. Thus, an increase in energy prices will lead to an increase in costs and a decrease in supply (the AS curve shifts to the left). A high harvest means an increase in aggregate supply (a shift of the curve to the right). An increase or decrease in taxes respectively causes a decrease or increase in aggregate supply.

The shape of the supply curve is interpreted differently in the classical and Keynesian schools of economics. In the classical model, the economy is considered in the long term. This is a period during which nominal values (prices, nominal wages, nominal interest rates) change quite strongly under the influence of market fluctuations and are flexible. Real values (volume of output, level of employment, real interest rate) change slowly and are taken as constant. The economy operates at full capacity with full employment of the means of production and labor resources.

Forecasting is the core of any trading system, which is why well-replicated Forex forecasts can make you endlessly wealthy.

The aggregate supply curve AS appears as a vertical line, reflecting the fact that under these conditions it is impossible to achieve further increases in output, even if this is stimulated by an increase in aggregate demand. Its growth in this case causes inflation, but not an increase in GNP or employment. The classic A S curve characterizes the natural (potential) volume of production (GNP), i.e. the level of GNP at the natural rate of unemployment or the highest level of GNP that can be created given the technologies, labor and natural resources available in society without increasing the rate of inflation.

The aggregate supply curve can move left and right depending on the development of production potential, productivity, production technology, i.e. those factors that influence the movement of the natural level of GNP.

The economy of any country is part of the world economy, and many firms invest their capital in foreign enterprises.

These investments bring them a certain income. Households can use their savings to purchase shares or bonds not only of national, but also of foreign firms that operate in their country. From these stocks and bonds they also receive some amount of income. Finally, specialists from a given country often work in branches of their companies or in joint ventures abroad. There they receive wages. At the same time, foreign firms invest their capital in enterprises of a given country, citizens of other countries buy securities that are issued by firms of a given country, and foreign specialists are employed in foreign branches and joint ventures. They all receive some kind of income on invested capital or for their labor.

The gross national product (GNP) is used to measure the volume of goods and services produced using a country's own resources. Until 1992, it was GNP that served in Russia as the initial indicator for measuring the national product. GNP includes the value of goods created not on the territory of the country, but by its residents. If a country has a completely closed economy, then calculating GDP and GNP gives the same result. But in the context of globalization, there are almost no such countries left. In cases with an open economy, the quantitative discrepancy between GNP and GDP is formed due to the activities of foreigners in the territory of a given country and the activities of citizens of a given country abroad.

GNP (GROSS NATIONAL PRODUCT)- the market value of all final goods (material goods and services) produced by residents of a given country for a certain period (regardless of the territory in which production took place).

For example, the Gazprom company invested 10 billion rubles. into gas production in Turkmenistan, and 100 Russian specialists worked in the Turkmen oil industry. The income on invested capital and wages of Russian oil workers (factor income) amounted to an annual income of 4 billion rubles. These incomes represent part of Turkmenistan’s GDP, since they were created on its territory, but they are part of Russia’s GNP, since they were created by the labor of Russian citizens and the capital of a Russian company. Consequently, when calculating Russia's GDP, factor incomes created by Russian labor and capital abroad should be excluded from it. When we calculate Russia's GNP, we will have to include in it the amount of these incomes created outside the country. GNP = GDP + Net receipts from abroad. Net receipts are the difference between receipts from abroad and payments abroad.

For most large countries, the size of GDP does not differ significantly from the size of GNP. Thus, in 2010, the value of GDP exceeded the value of GNP by 2.6%. This means that the primary income of non-residents of Russia exceeds the amount of income received by Russians abroad. Currently, the main macroeconomic indicator for measuring product in all countries is gross domestic product.

Source: Economics. Fundamentals of economic theory: textbook for grades 10–11. for educational organizations. Advanced level: in 2 books. Book 2 // Edited by: Ivanov S. I., Linkov A. Ya. Publisher: Vita-Press, 2018 Why is the System of National Accounts needed? If you want to get information about the level of production and welfare in a particular country, the sectoral structure of its economy, and the price level, then be sure to refer to statistical data. What is Gross Domestic Product (GDP)? Gross domestic product is the market value of all final goods (material goods and services) produced in the territory of a given country over a certain period. How to calculate national income, personal income and disposable income GDP is an important economic indicator that most fully characterizes the volume of the final product produced by the state in a given period. The difference between real GDP and nominal GDP We have already indicated that the volume of GDP, as well as all related macroeconomic indicators, is calculated in current prices at which created goods and services are sold. In this case, the value of nominal GDP is determined. GDP and quality of life Is it possible to measure the quality of life of people in a particular country using per capita GDP? Can we say that with an increase in the size of a country's GDP and national income, the population of any country always becomes more satisfied with the quality of their life? Gesell's monetary system How to limit the speculative activities of banks What is the ruble backed by? Reason for high GDP growth rates after 1998: depreciation of the ruble

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A general indicator of production volume in the national economy is gross product (GP), which is divided into GDP and GNP:

Gross Domestic Product (GDP) – This is the total market value of the total final production of goods and services created in the territory of a given country during the year using factors of production owned both by that country and by other countries.

Gross National Product ( GNP) – it is the market value of the total final production of goods and services created by national enterprises at home or abroad during the year using factors of production owned by that country.

GNP differs from GDP by the sum of the balance of income received by a given country from abroad and income transferred abroad received in the territory of a given country. Features of the GDP or GNP indicator:

1) all goods and services are paid in cash once;

2) these are indicators that take into account the volume of production for a certain period of time, usually a year;

3) these are indicators that take into account goods and services, regardless of whether they have been sold or not;

4) these indicators take into account only final products (products for final consumption), and not for resale and processing.

The basic principles for calculating these indicators are: exclusion "double counting errors""and exclusion from calculation unproductive transactions. The first principle is ensured by industry accounting of only added value.

Added value- this is the market price of the volume of products produced by the company minus the cost of consumed raw materials and materials purchased from suppliers. This is the contribution of a given company to the production of the current year, consisting of the wages of its employees, utility payments and rent payments.

Exclusion from the calculation of non-production transactions, i.e. those transactions that are not accompanied by an increase in the production of goods and services. Non-productive transactions are: Firstly, purely financial transactions of three types: purchase and sale of securities; government transfer payments to certain categories of citizens (social insurance payments, unemployment benefits, pensions, benefits, scholarships); private transfer payments (one-time gifts from relatives, monthly subsidies to students from their parents), Secondly, sale of second-hand items (each item should be counted in the calculation of GDP only once).

where C – personal consumer expenses;

I – gross private domestic investment, including industrial capital investment in primary production;

G – government procurement of goods and services;

Xn – net exports – the difference between exports and imports.

The calculation method based on company income includes:

where A – depreciation – deductions for capital consumption;

T – indirect taxes on business;

(C+S) – (expenses and savings show income) – these are wages, contributions to social insurance funds, pensions and employment;

R – rent payments (rent);

r – interest income of capital owners;

P – profit, including that received by private owners, corporate profits.

A feature of calculating GNP based on income is the presence in the income composition of two categories of distribution of funds not related to the payment of income - depreciation (A) and indirect business taxes (T).

Depreciation – These are annual deductions for the reimbursement of capital consumed during the year, i.e., fixed assets operating in production for no more than a certain period, which depends on the policy of the enterprise. In general, for the national economy, depreciation charges are a huge amount, but it is not an increase in profit, since it must be set aside to replace in the future the capital consumed during production in individual years.

Indirect business taxes include: value added tax (VAT), sales tax, excise taxes, customs duties, property tax, etc. These taxes are included in the price of goods and services, and thus are passed on to the buyer. The influx of indirect payments into the treasury is, in fact, unearned income of the government, since it does not make any contribution to the current year's production in exchange for the receipt of indirect taxes into the budget.

Calculation of GDP by industry takes into account the role of industries in creating GDP by value added.

Reducing the value of GDP by the amount of depreciation charges, we get net national product (NNP ) – the total annual production of goods and services produced and consumed in the country.

National income (NI)– the value newly created during the year, characterizing the welfare of society, i.e. the amount of wages, rent, profit, interest, is determined by subtracting from the value of income indirect taxes on business, which do not reflect the contribution of economic resources in its creation.

Personal income (PD)- this is the amount of income of the population, determined by deducting from the national income (NI) the contributions of workers, employees and employers to the social insurance system, taxes on corporate profits and undistributed profits, but adding transfer payments . It is earned income, not received income. Citizens do not receive all of their personal income, as it is subject to taxes.

Disposable income (Disposable income)– income available for direct spending by households; determined by subtracting individual taxes from personal income.

The income level of the population is reflected using the following indicators.

Average per capita cash income, which are calculated by dividing the total cash income by the current population.

Nominal money income population is characterized by the total amount of money received (or accrued) over a certain period of time.

Disposable cash income – This is income that can be used for personal consumption and savings. They are equal to nominal income minus taxes, mandatory payments and voluntary contributions from the population.

To determine the state of economic well-being of a country, there are a significant number of different criteria with the help of which the country’s macroeconomic indicators are compiled. There are also those that relate to psychological, social and others. But in this article, only those that indicate the level of economic prosperity are of interest, or rather, two of them: gross domestic product and gross national product. And the main question: what is the difference between GDP and GNP? In most countries of the world, these indicators do not differ much from each other. But there is a difference between them, and within the framework of the article it is necessary to find out how much the values differ when calculating, why they are calculated and, finally, what is the meaning of these parameters, and what are these macroeconomic indicators in general.

What's happened

Gross domestic product refers to the total value of all produced material goods and services rendered that were provided and brought into a state of readiness for sale. Moreover, products made within the borders of a certain country are taken into account. This is the main difference between GDP and GNP. Counting is carried out in nominal banknotes. But conditions should be taken into account, because sometimes products can be included in GDP, and sometimes they cannot.

Example of calculating GDP

So, if there is a certain factory that produces semi-finished products and exports them abroad, then the total cost of semi-finished products produced by the enterprise will be added to the gross domestic product. But if the plant uses them in the future itself to manufacture more advanced and necessary products that will be exported, then the cost of the further product (the very final one, ready for external sales) will be added to the value of GDP. It should be said separately what real and nominal GDP/GNP are. The second means what is currently available, while the first means what it should be as a result of dividing GNP by the general price level. Quite confusing for a non-expert. The main difference that needs to be understood when studying GDP and GNP is the territorial aspect of the calculation.

What is gross national product

The gross national product is understood as the total value of material goods and services that were produced and provided by representatives of one people throughout the entire Earth. Compared to calculating gross domestic product, it is more labor-intensive and only gives a relative idea of the standard of living. It’s all because of the use of money: for example, if a person moved to another country and started business there, GNP takes into account the income that he brings to the state, but this income is brought to a completely different person, from whom his homeland does not receive direct taxes and investments in the economy . A bypass effect is possible when money earned abroad is transferred to the homeland, but even this option is not optimal from the point of view of using human potential. How GDP differs from GNP should already be clear at this stage; if not, you need to read the previous two paragraphs.

How is GDP calculated?

Gross domestic product for a certain year is calculated in this way: the market value of all products produced by a country is summed up in a certain monetary value, which is ready for sale and use abroad by the enterprise that produced it. Here we should digress and talk about the so-called positive shadow sector of the economy. Calculating the real gross national product of a country is very problematic.

Positive shadow GDP

Usually you can learn from TV screens, newspaper pages, on the radio, and on the Internet that the shadow sector is always bad. But only illiterate people can say that. Let's give an example: you have a garden of ten acres, and it was planted with potatoes, carrots, radishes, herbs and other crops. Time has passed, the time has come to harvest. Vegetables collected from plots do not openly contribute to the gross domestic product, therefore, technically, this is part of the shadow sector of the economy - the production of products without imposing taxes. But it is grown, as a rule, for one’s own consumption; it does not harm society, but can only reduce the profits of individual entrepreneurs. It is situations like this that make up the positive shadow sector of the economy. Why was this told? The fact is that in different countries of the world there have been and, perhaps, there will be more attempts to determine the boundaries of this sector and add it to the gross domestic product (or gross national product), but so far, due to the impossibility of obtaining accurate data on the volume of work, such a calculation has not been possible is underway. Measurement of GDP and GNP is carried out in local currencies for “their” investors, and in US dollars for reporting data to international ones. Conversion is carried out at the official exchange rate.

How is GNP calculated?

The gross national product is calculated based on the data provided by people who have citizenship of a certain country, or, if there is a division into nations (provided for in passports), then on the basis of the income of representatives of one nation. This calculation technique is necessary to obtain information about the state of the state-forming masses as a reason for judging the state of affairs in the power itself.

Who calculates the gross domestic product?

GDP is calculated by two organizational forms: private and public. The tax and customs services and various statistics committees help the state collect the required information. The information they collect is quite accurate. But there are a number of pitfalls here that spoil government statistics. Among them: submission of false data by managers or owners of enterprises, deliberate falsification of data by the government or its subordinate structures. In world practice, it has been noted that owners of enterprises in capitalist countries have a tendency to reduce data, and increasing indicators is of interest to managers in countries with a significant public sector, such as in China, where scandals arise over and over again about enterprises overestimating their profitability and turnover indicators.

How do private structures count?

Private structures operate using other methods. They carry out calculations based on official data, but at the same time they check the data provided by other states on the amount of turnover, check with the data of banking institutions and other private structures that have access to the required type of information, and based on a comprehensive assessment they already make their own conclusions about the size of the gross domestic product and present their subjective judgments about the correspondence of government data to the real state of affairs. The calculation of GDP and GNP is carried out by them in order to provide additional confirmation of the financial capabilities of the power, as well as as an indicator of how trustworthy the country’s government can be from the point of view of a foreign investor.

Who calculates the gross national product?

GNP is calculated using almost the same methods as GDP, but the scale of action changes. Thus, if the gross domestic product is calculated for a certain territorial unit, then when calculating the gross national product it is necessary to take into account what is relevant to the people for whom the indicator is calculated.

The concepts of GDP and GNP are not very different for most countries, even when calculated by private entities. Although for some there are still differences, and they are huge. One of these states is Tajikistan, which receives 60% of its gross domestic product from the work of economic migrants. Thus, the gross national product of this country is a multiple of GDP.

Why is GDP calculated?

There are quite a few methods for calculating gross domestic product. Initially, the state wants to know the potential of the economy in order to be able to plan the further consistent development of the state formation. Also, a comparison of gross domestic product indicators allows you to view the progression and stability of its development. That is, data is provided by which potential investors will decide whether the country meets favorable indicators for them and whether it is worth investing in a project.

GDP is based on a number of other indicators that show the overall level of living comfort, a person’s ability to realize their talents, the level of social security and many other aspects of life. One such indicator is the Human Development Index. But even if things are going badly in a country, then calculating the gross domestic product has a certain meaning: it uniquely shows the level of openness in the country, and although in moments of decline it restrains investors’ investments and causes panic among them, when growth begins it can provoke those who invests money in assets that have reached the lower level of value, and, using the snowball principle, cause economic growth. GNP and GDP indicators are valuable precisely as indicators of a country’s level of development, indicators of possible potential that can be worked with and which can be developed, converting into profit.

Why is GNP calculated?

The main purpose, which should only be mentioned, is to find potential reserves. The fact is that migrants who have left the country and are conducting economic activities in the territory of another state can transfer money to their homeland. And ideally, having saved up some money, they can return home and start their own business, creating jobs and thereby revitalizing economic life. But the problem is that although they try to take everyone into account, a rather small number returns to their homeland, so it is impossible to consider the entire potential as usable. Typically, various models take into account rates from 20 to 80 percent. Data is used to identify groups of people who are most likely to return.

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