Gross Domestic Product

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GROSS DOMESTIC PRODUCT (GDP) and GROSS NATIONAL PRODUCT (GNP)

Macroeconomic output is usually measured by Gross Domestic Product (GDP) or Gross National Product (GNP).GDP and GNP measure the size and strength of an economy but are calculated and used in different ways.

GDP stands for Gross Domestic Product, the total worth estimated in currency values of a nation’s production in a given year, including service sector, research, and development. That translates to a sum of all industrial production, work, sales, business and service sector activity in the country. Usually this is calculated over a period of one year, but there may be analysis of short and long term trends to be used for economic forecast. Gross Domestic Product can also be calculated on a per capita (or per person) basis to give a relative example of the economic development of nations.

GNP stands for Gross National Product. In general terms, GNP means the total of all business production and service sector industry in a country plus its gain on overseas investment. In some cases GNP will also be calculated by subtracting the capital gains of foreign nationals or companies earned domestically. Through GNP an accurate portrait of a nation’s yearly economy can be analyzed and studied for trends since GNP calculates the total income of all the nationals of a country. This gives a far more realistic picture than the income of foreign nationals in the country as it is more reliable and permanent in nature. Gross National Product can also be calculated on a per capita basis to demonstrate the consumer buying power of an individual from a particular country, and an estimate of average wealth, wages, and ownership distribution in a society

Comparison chart

GDP versus GNP comparison chart
GDP GNP
Stands for Gross Domestic Product Gross National Product
Definition An estimated value of the total worth of a country’s production and services, within its boundary, by its nationals and foreigners, calculated over the course on one year. An estimated value of the total worth of production and services, by citizens of a country, on its land or on foreign land, calculated over the course on one year.
Formula for

Calculation

GDP = consumption + investment + (government spending) + (exports − imports). GNP = GDP + NR (Net income inflow from assets abroad or Net Income Receipts) – NP (Net payment outflow to foreign assets).
Uses Business, Economic Forecasting. Business, Economic Forecasting.
Application (Context in which these terms are used) To see the strength of a country’s local economy. To see how the nationals of a country are doing economically.
Layman Usage Total value of products & Services produced within the territorial boundary of a country. Total value of Goods and Services produced by all nationals of a country (whether within or outside the country).
Country with Highest Per Capita (US$) Qatar ($102,785) Luxembourg ($45,360).
Country with Lowest Per Capita (US$) Malawi ($242). Mozambique ($80).
Country with Highest (Cumulative) USA ($17.42 Trillion in 2014). USA (~ $11.5 Trillion in 2005).

Nigeria (per capita) $3,005.51 (2013)

Nigeria (GDP) $568.51 billion (2014)

Discussion for the week:

According to the IMF, Nigeria’s GDP has grown by 6.8% year on year since 2012. Considering Nigeria’s economic situation, was there really growth & development? Or is there just growth without development? What factor in the GDP computation could have been responsible for the high growth rate?

Let’s have your reaction!!!

References:

http://www.diffen.com/difference/GDP_vs_GNP

http://www.tradingeconomics.com/nigeria/gdp

http://www.imf.org/external/np/sec/pr/2015/pr1591.htm

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