Understanding GDP, GNP, GNI
GDP
Gross Domestic Product
A broad measure of an economy’s performance
The total value of ALL goods and servicesproduced IN a country each year
ALL economic output (foreign and domestic)
‘per capita’ means per person
GDP per capita = GDP total / population
GNP
Gross National Product
Value of goods and services produced by acountry’s citizens, regardless of where theylive.
Tries to isolate economic activity of foreign-owned firms
Only calculates the nationally ownedcompanies, regardless of where they arelocated
GNI
The total value of goods andservices produced within acountry together with the balanceof income and payments from orto other countries.
Increasingly preferred over GDPand GNP
FLAWS
GDP, GNP, GNI are almost always reported inUS dollars.
Currency exchange rates can sometimes affectreports in other countries
Per capita measures also do not reflectpurchasing power of money in a country
Purchasing power is what you can get for yourmoney in a country
PPP
Purchasing Power Parity
The number of units of a country’s currencyneeded to buy the same amount of goods andservices as $1 would buy in the United States
Includes a wide range of things: food,transport, clothing, housing
Measures what people can actually afford