GDP What Is the Difference

GDP

What is the difference between the GDP, GNP and GNI?

The main differences between the GDP, GNP and GNI are they will calculate as well as analyze the economic status of a country. Depending upon the number, these figures can make the standard of living and levels of prosperity to appear to be better or worse. This will influence how various international institutions (such as the IMF and World Bank) classify the levels of productivity. (Pettinger)

For example, a comparison of the three figures provides economists with contrasting insights about the strength of economic activity. This is because each number is looking at unique perspectives. As far as the GDP is concerned, it is offering insights about national income, output and expenditures in the economy. (Pettinger) It is calculated using the below formula:

Consumer Spending + Investments Made by Industry + Excess of Exports over Imports + Government Spending = GDP ("Calculating GDP," 2013)

This is illustrating how the GDP is exclusively looking at the economic activity inside a specific nation (over a stated period of time). These figures will provide precise information about how quickly a country is growing or contracting. (Pettinger) ("Calculating GDP," 2013)

In the case of GNP, it is looking at the total amounts of economic activity performed by a nation. This means that any kind of business that is conducted (legal or illegal) is counted. At the same time, the contributions of citizens living abroad (i.e. ex-pats) are included. (Pettinger) ("Gross National Product") The way that it is calculated is though using the below formula:

Consumption + Government Expenditures + Investments + Exports + Foreign Production by U.S. Companies -- Domestic Production by Foreign Companies = GNP

This is showing how the GNP is concerned about understanding the total amounts of production (domestically and abroad). (Pettinger) ("Gross National Product")

The GNI is examining the total income that is generated by the citizens of a particular country. It looks at any kind of value that is added plus the taxes associated with the product. However, area such as subsidies and income from abroad are not calculated in these figures. (Pettinger)

The data that is provided is showing how the GNI is concentrating on the total income that is earned by the citizens of a country. This helps economists to determine their standard of living and purchasing power of consumers. In the future, this improves the accuracy of their forecasts by offering them with a tool to objectively compare and analyze each country. ("Calculating GNI) (Pettinger)