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Gross Domestic Product(GDP)

GDP is the value of the total final goods and services produced within the boundaries of a
country for a given period of time and measured by the value-added principle. It is the single
most widely used measure of the output of an economy. It includes those goods and services
produced in the current time period only. GDP is evaluated at market prices (factor cost +
indirect taxes).
Gross National Product (GNP)
GNP is the value of output produced by land, labor, capital and entrepreneurial talent
supplied by citizens whether the resources are located at home or abroad.
GNP=GDP + foreign earnings of domestic residents and firms - earnings
in the domestic economy by foreign residents and firms
Net National Product (NNP)
NNP is the market value of annual output less depreciation (capital
consumption).Depreciation refers to estimates of the amount of capital worn out or used up
(consumed) in producing the gross domestic product.
National Income(NI)
It is all income earned by citizens of a particular nation for their current contributions to
production within the nation or abroad
Personal Income
It is all income received by households whether earned or not
Disposable Income
It is all income received by households less personal taxes
Limitations of GDP
Even if the most comprehensive measure of the economic performance of a nation, GDP has the
following limitations
1. Non-market productive Activities are Left Out
Because goods and services are evaluated at market prices in GDP, non market production is
left out. This includes such examples as homemakers' services and agrarian non market
production.
2. The Informal Economy is Left Out
Also left out of GDP are illegal forms of economic activity and legal activities that are not
reported to avoid paying taxes - the informal economy. Gambling and the drug trade are
examples of illegal activities. Repairmen may underreport or fail to report about the income
receipt from the service they provide to avoid tax payment.
3. GDP is not a Welfare Measure
GDP measures production of goods and services; it is not a measure of welfare or even of
material well-being. For one thing GDP do not reckon the welfare that can be realized from
leisure. If we all began to work 24-hour a day, GDP would increase, but we would not be
better off for leisure also contributes to maximize welfare.
GDP also fails to subtract for some welfare costs of production. If, for example, production of
chemical fertilizer cause environmental pollution, we only give weight to the amount of fertilizer
produced in GDP but may ignore the economic cost of pollution. Thus GDP is a useful measure
of the overall economic