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GDP vs. GNP

GDP vs. GNP

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GDP vs. GNP

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  1. GDP vs. GNP Sections 13.1 - 13.3

  2. GDP – What is it? • What does it stand for? • Gross DOMESTIC Product • Domestic – in home • Refers to the value of all the final goods and services produced within a nation’s borders. • Goods made “in home”

  3. GDP - Examples • Examples of what is included in GDP: • An orange grown in Florida and exported to Canada • A sandwich from a Subway in Virginia • A new car sold in Tennessee • A teacher’s services at school (salary) • BMW plant in Michigan – German owned • Ford Plant in South Carolina – American owned

  4. GDP - Examples • Examples of what is NOT included in GDP: • A used car • The bread before it’s used to make a Subway sandwich in Virginia • An American owned clothing factory in Tokyo • Drugs illegally grown in California • Medicines smuggled in from Europe

  5. GDP – How is it determined? • C + I + G + (X – M) = GDP • ALL goods and services x Price = GDP • Ex: (1000 oranges x $0.50) + (20 BMWs x $75,000) + (500 microwaves x $60) + (100 teachers x $50,000) + etc… = GDP

  6. Different Ways of Expressing GDP • INFLATION is a rise in the general level of prices. • Current GDP is NOT adjusted for inflation. • Real GDP is adjusted for inflation. • GDP per capita is the measurement of the output per person (it is NOT a measurement of income) • GDP / Population = Per capita GDP

  7. GNP – What is it? • What does it stand for? • Gross NATIONAL Product • National – by citizens • Refers to the value of all the final goods and services produced by a nation’s citizens. • Goods made “by citizens” • Excludes goods + services produced w/ labor + property supplied by foreigners in the US. • GNP is used to measure income – not output. • Usually very close to a nation’s GDP.

  8. GNP - Examples • Examples of what is included in GNP: • An orange grown in Florida and exported to Canada • A sandwich from a Subway in Virginia • A new car sold in Tennessee • A teacher’s services at school (salary) • Ford Plant in Michigan – American owned • Chevrolet plant in Canada – American owned

  9. GNP - Examples • Examples of what is NOT included in GNP: • A used car • The bread before it’s used to make a Subway sandwich in Virginia • An French owned clothing factory in New York • Drugs illegally grown in California • Medicines smuggled in from Europe by Americans

  10. GNP – How is it determined? • GDP + payments from goods made outside the US by American owned businesses– payments to foreign countries from goods made inside the US by foreign owned businesses= GNP

  11. Different Ways of Expressing GNP • INFLATION is a rise in the general level of prices. • Current GNP is NOT adjusted for inflation. • Real GNP is adjusted for inflation. • GNP per capita is a measurement of income per citizen • GNP / Population = Per capita GNP