Understanding National Income Accounts: GNP vs. GDP - Prof. Nguyen, Summaries of International Economic Relations

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National income accounts

1. Gross national production (GNP)
2. Capital Depreciation and International Transfers
3. Gross domestic product (GDP)

1. Gross national production

• (^) Of central concern to macroeconomic analysis is a country’s gross

national product (GNP), the value of all final goods and services

produced by the country’s factors of production and sold on the

market in a given time period.

• (^) GNP, which is the basic measure of a country’s output studied by

macroeconomists, is calculated by adding up the market value of all

expenditures on final output

Capital Depreciation and

International Transfers

• (^) GNP does not take into account the economic loss due to the

tendency of machin-ery and structures to wear out as they are used.

This loss, called depreciation

• (^) A country’s income may include gifts from residents of foreign

countries, called unilateral transfers.

Gross Domestic Product

• (^) GDP does not correct, as GNP does, for the portion of countries’

production carried out using services provided by foreign-owned

capital and labor

• (^) GNP tracks national income more closely than GDP does, and national

welfare depends more directly on national income than on domestic

product.