GDP and GNP

Gross Domestic Product (GDP) is the value of final goods and services produced within a country in a given period. It is the total of all activities in a country, regardless of who owns the productive asset.

Gross National Product (GNP/GNI) is the market value of all products and services produced in one year by labour and property supplied by the residents of a country.

Unlike Gross Domestic Product (GDP), which defines production based on the geographical location of production, GNP allocates production based on ownership. It is the total income that is earned by a country's factors of production regardless of where the assets are located.

Thus GNP=GDP + (incomes earned from assets abroad-Incomes paid to foreign assets operating domestically)

720px-Gdp nominal_and_ppp_2005_world_map_single_colour

source: wikipedia

Nominal GDP & Real GDP

The raw GDP figures are called the Nominal or Current GDP. When comparing GDP figures from one year to another, it is desirable to compensate for changes in the value of money – i.e., for the effects of inflation or deflation. The GDP adjusted for changes in money-value in this way is called the Real GDP.

For example, suppose a country's GDP in 2000 was $100 million and its GDP in 2010 was $300 million; but suppose that inflation had halved the value of its currency over that period. To meaningfully compare its 2010 GDP to its 2000 GDP we could multiply the 2010 GDP by one-half, to make it relative to 2000 as a base year.

The result would be that the 2010 GDP equals $300 million × one-half = $150 million, in 2000 monetary terms. We would see that the country's GDP had, realistically, increased 50 percent over that period, not 200 percent, as it might appear from the raw GDP data.

GDP Deflator

GDP Deflator=

Nominal GDP

X 100

Real GDP

GDP per capita

GDP per capita is the value of all final goods and services produced within a country in a given year divided by the average population for the same year.

Comparisons of national wealth are also frequently made on the basis of nominal GDP, which does not reflect differences in the cost of living in different countries. However, GDP per capita is often considered an indicator of a country's standard of living and often used as an economic development indicator.

1024px-GDP PPP_Per_Capita_IMF_2008

source: wikipedia

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