GROSS NATIONAL PRODUCT (GNP)

GROSS NATIONAL PRODUCT (GNP)

           This is the basic social accounting measure of the total output or aggregate supply of goods services, gross national product is defined as the total market value of all goods and services produced in a year. It is a measure of the current output of economic activity in the country. Two things must be noted in regard to gross national product.

(i) It measure the market value of the annual output. In other words, G.N.P is a monetary measure. There is no way of adding up the different sorts of goods and services produced in a year except with their money price. But in order to know accurately the changes in physical output, the figure for gross national product is adjusted for price changes by comparing to a base year as we do when we prepare index numbers.

(ii) For calculating gross national product accurately, all goods and services produced in any given year must be counted once, but not more than once. Most of the goods go through a series of production stages before reaching a market. As a result, parts or components of many goods are bought and sold many times. Hence, to avoid counting several, gross national product only includes the market value of final goods and ignores transactions involving intermediate goods.

              What we do mean by final goods? Final goods are those which are being purchased for final use and not for purchased for further processing or for resale. The sale of final goods is included in gross national product, while the sale of intermediate goods is excluded from gross national product, why? Because the value of final goods used in their production, for instance the value of cloth includes the value of cotton used in the making of cloth. The inclusion of intermediate goods would involve double counting and will therefore give an exaggerated estimate of gross national product.

             Another important thing to be borne in mind while calculating the G.N.P Is that non-productive transaction should be excluded. These are purely financial transactions or transfer payment like old-age pensions or unemployment doles which are merely grants or transactions relating to existing shares or second-hand shares.

          Another definition of GROSS NATIOAL PRODUCT

          The concept of gross national product (GNP)  at market prices is more comprehensive than GDP Gross domestic product (GDP) Is the total value, measured in current price, of all final goods and services produced in the economy during a given time period. It includes all factor incomes of non-residents paid to foreigners.

       Gross national product, on the other hand, measure the total income earned by the permanent residents of a country in a given time period. GNP includes factor incomes earned from abroad by the residents of a country and excludes income that foreigners earn from here. In other words when net factor income from abroad is added to GDP, we and thus GNP=GDP+ Net factor income earned from abroad.

       The gross national product is one of most important concept of national income, and four other concept of national income included

(1) Net national product (N.N.P).

(2) National income (I.N).

(3) Personal income (P.I).

(4) Disposable income (B.I).