GDP

&
GNP
Bangladesh Studies – Summer 2022
Presented By -

JOY PAL
ID: 201002418
Dept. of CSE
Green University
CONTEN
T
GD GN GDP VS
P P3 GNP
1 5

2 4 6

Calculating Calculating
Conclusion
Method of GDP Method of GNP
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GDP
 Gross Domestic Product (GDP) is the total monetary or market value of all the
finished goods and services produced within a country's borders in a specific
time period.

For example, An orange grown in Florida and exported to Canada.

 Top 5 Countries with the highest GDP are USA, China, Japan, Germany, India

 3 Types of GDP –
i. Nominal GDP
ii. Real GDP
iii. Actual GDP 
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Components of GDP
GDP

Personal Consumption Investment Government Net Exports

Expenditures
(C) (I) (G) (NX)

Fixed Inventories Exports Imports

Investment

Nonresidential Residential

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Measuring
GDP
 There are 2 methods of calculating GDP

Expenditure approach
The sum of all final goods and services purchased in an
economy over a set period of time.

Income approach
All economic expenditures should equal the total income
generated by the production of all economic goods and
services.

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Expenditure approach

Formula

GDP = C + I + G + ( X –
M)
Here,
C = Consumption spending
I = Capital Equipment / Business investments
G = Government purchases
X = Exports
M = Imports
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Income approach

Formula

GDP = National income (TNI) + Sales taxes (T) +

Depreciation (D) + Net foreign factor income (F).

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 Importance of GDP

 GDP is regarded as the most important of the indicators that are used by
economists all over the world for determining the growth of an economy.
It takes into account the total production of the country during a year.

 It serves as a major factor that is used for determining the development

of the economy and a very important parameter for estimating the
performance of an economy.

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Limitations of GDP

i. GDP does not include non-market transactions.

ii. It fails to indicate whether the growth of a nation is sustainable.

iii. It fails to take into account the impact on human health and
environment that may arise as externalities from the production or
consumption of the output.

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GNP

 Gross National Product (GNP) is an estimate of the total value of

all the final products and services turned out in a given period
by the means of production owned by a country's residents.

For example, the GNP of the United States is $250 billion higher than its
GDP due to the high number of production activities by U.S. citizens in
overseas countries.

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Components of GNP

Personal
Consumption Net Exports
Expenditure

Private Others
Government
Domestic Expenditure
Expenditure
Investment

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Measuring
GNP

Formula

 GNP = Consumption expenditure (C) + Investment (I) +

Government expenditure (G) + Net exports (X) + Net income (Z)

## GNP per capita is used for the calculation of GNP on a country-to-country

comparison, while it becomes problematic when a citizen holds a dual citizenship.
In that case, their income is contributed as GNP for each of the respective countries,
which leads to double counting.
Importance of GNP

 GNP is considered as an important economic indicator by economists. It is

used by them for finding solutions to the economic issues such as poverty
and inflation.

 When income is calculated on the basis of per person irrespective of the

location, GNP becomes a much more reliable factor than GDP.

 The information obtained from GNP is used for analysing the BoP (Balance
of Payments). In some countries or unions, such as the European Union,
economists use GNI or gross national income.

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Limitation of GNP

Major Limitations of Gross National Product (GNP)

i. Exchange Rate
ii. Cannot tell if Economy is Growing
iii. GNP Inflated due to Expats
iv. GNP Deflated due to Foreign Direct Investment

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 GDP VSGNP

 The aggregate of all the goods and the services generated within the country’s geographical
limits is GDP. And the aggregate of all the goods and services rendered by the country’s
citizens is known as GNP.

 GDP considers the production of products within the country’s boundaries. On the other
hand, GNP measures the production of products by the companies, industries, and other
firms of the country’s residents.

 The fundamentals for calculating the GDP are location, while GNP is based on citizenship.

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GDP VSGNP (Cont’d)

 GDP, productivity is calculated on a country’s scale. while GNP, its calculation is the
productivity on an international level.

 Gross Domestic Product focuses on calculating domestic production, but Gross

National Product only considers individuals, firms, and corporations.

 Gross Domestic Product measures the strength of a country’s domestic economy. On

the other hand, the Gross National Product measures how the residents contribute to
the country’s economy.

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Conclusion

The key to distinguishing between these two is that while calculating GDP, we

have to consider all the things produced within the country’s borders.

Therefore, it also includes the goods and services produced by foreign

nationals. On the other hand, while we talk about the GNP, we only consider
the production done by the country’s residents, whether within or outside
the country, and the output of foreign citizens is not included.

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Thank
You!
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