Gross Domestic Product | GDP Formula | Gross National Product

Gross Domestic Product | GDP Formula | Gross National Product

Gross Domestic Product (GDP)

GDP: For some purposes we need to find the total income generated from production within the territorial boundaries of an economy, irrespective of whether it belongs to the residents of that nation or not. Such an income is known as Gross Domestic Product (GDP) and found as: GDP GNP-Net factor income from abroad.

GNP as a Sum of Expenditures on Final Products

Expenditure on final products in an economy can be classified into the following categories: Personal Consumption Expenditure (c): The sum of expenditure on both the durable and non durable goods as well as services for consumption purposes.

Gross Private Investment (g) is the total expenditure incurred for the replacement of capital goods and for additional investment.

Government Expenditure (G) is the sum of expenditure on consumption and capital goods by the govemment, and

Net Exports (Exports-Imports) (X-M) constitute the difference between the expenditure or rest of the world on output of the national economy and the expenditure of the national economy on output of the rest of the world.

GNP is the aggregate of the above mentioned four categories of consumption expenditure That is,

GNP=C+Ig+G+(X-M)

GNP as the Total of Factor In comes

When national income is calculated after excluding indirect taxes like excise duty, sales tax, etc and including subsidies we get GNP at factor cost as this is the amount received by all the factors of production (indirect taxes being the amount claimed by the government and subsidies becoming a part of factor income).

GNPFC = GNPMP - Indirect taxes + Subsidies

Net National Product (NNP)

The NNP is an alternative and closely related measure of the national income. It differs from GNP in only one respect. GNP is the sum of final products. It includes consumption goods plus gross investment plus govemment expenditures on goods and services plus net exports. Here