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Gross National Product - Essay Example

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Gross National Product

So, for example, when Americans receive more income from their overseas investments than foreigners receive from their investments in the United States, American GNP will be somewhat larger than GDP in that year. If Americans receive less income from their overseas investments than foreigners receive from their US investments, on the other hand, American GNP will be somewhat smaller than GDP (
Equivalent estimates of GNP (or GDP) produced in a given year may theoretically be arrived at through at least three different accounting approaches, depending upon whether the transactions that determine the prices of final goods and services are looked at and tallied up by focussing on the buying or by focussing on the proceeds from selling or by focussing on the nature of the products themselves. Using the expenditure approach, you can estimate total GNP as the sum of estimates of the amounts of money that are spent on final goods and services by households (Consumption), by business firms (Investment), by government (Government Purchases), and by the world outside the country (Net Exports). Using the incomes approach, you can estimate total GNP by summing up estimates of the different kinds of earnings people receive from producing these same final goods and services:
Total wages and salaries
Profits of incorporated and unincorporated businesses
Rental incomes
Interest incomes
(Plus certain adjustments to account for wear and tear on productive assets like plant and machinery -- depreciation -- and what are called indirect business taxes). Using the product or output approach, you can estimate GNP by summing up the output of all the various organizations producing goods and services in the country, subtracting out the costs of their raw materials to avoid double counting and making suitable adjustments for depreciation and for the value of imports and exports. (Butt 2002, Kopecky 1995) (In theory, all three approaches should give you the same grand totals -- but of course in actual practice there will be discrepancies, and sometimes sizable discrepancies, between the three estimates.)
The GNP index was originally devised to measure the mobilization of arms production during World War II -- and still includes the production of bombs, bullets and tanks. But it completely ignores the value of natural resources, education, unpaid subsistence labor, and self-employment labor which accounts for over half of the world's production and nearly 80 percent of its capital investments. Many politicians in less-developed countries believe the GNP scorecard is rigged in favor of industrial countries. They cite perverse, no-win effects of trying to please the International Monetary Fund by boosting their GNP growth: increasing environmental depletion rates, increasing unemployment, and, often, uneven income distribution. We already see similar effects in Eastern Europe where GNP-oriented economic reforms are creating dangerous economic backlashes, such as soaring unemployment in Poland (Gilman 2000).
In the emerging global village, the study of national economics has become increasingly combined with the study of social and ecological issues that are far too important to be left to the economists' realm. Until recently, developed nations' governments and their economic bureaucracies have helped ...Show more


Gross National Product (GNP) is an estimate of the total money value of all the final goods and services produced in a given one-year period by the factors of production owned by a particular country's residents. GNP and GDP are very closely related concepts in theory, and in actual practice the numbers tend to be pretty close to each other for most large industrialized countries…
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Gross National Product essay example
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