NATIONAL PRODUCT: Terms, Definitions &
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National Product (GNP)-
the dollar value of goods and services (goods) produced in any given year at
market price (current price).
GNP - A calculation that eliminates
price increases (inflation) to arrive at a truer valuation of what actually is
being produced within the country. This calculation uses constant dollar values.
GNP - The value of GNP at current
prices, normally called GNP but used to differentiate between current and
- The average value of production per person in a country in a given year.
Determined by dividing the total dollar value of production by the total
population of the country. This is determined the same way in every country in
the world that publishes statistics.
COMPONENTS OF GROSS NATIONAL PRODUCT
GROSS NATIONAL EXPENDITURES (GNE) and GROSS NATIONAL INCOME (GNI).
(GNE) - The dollar value spent on current goods and services during a
twelve-month period. GNE has 5 sectors included in its calculation.
CONSUMPTION (C)- The value of all goods and services purchased by
INVESTMENT (I)- The value of all spending by BUSINESS.
GOVERNMENT (G) - The value of all spending by the GOVERNMENT.
EXPORTS (E)- The value of all that is produced in Canada but sold abroad.
IMPORTS (M)- The value of all that is produced abroad but sold in Canada.
Net Exports is determined by subtracting imports from exports (E-M)
following formula is used to determine GNE. GNE = C + I + G + (E - M)
NATIONAL INCOME (GNI) -
The total dollar value of money earned producing, distributing and selling the
goods and services produced, including profits. GNI has 6 sectors included in
WAGES & SALARIES (W)- The value of all income earned in the country.
RENT (R)- The value of income earned through rentals.
INTEREST (i)- The amount of interest earned in the country in a given
PROFIT (P)- The profit realized at all stages of production throughout
the country by all sectors of the economy.
DEPRECIATION ALLOWANCE (D)- The decrease in value of old inventory of
both business & the government. This is usually just called DEPRECIATION.
Depreciation occurs on the books of business and allows business to decrease the
value of old or unsold inventory. i.e. used cars.
INDIRECT TAXES (IT)- Hidden taxes included in the price of goods such as
the old Federal sales tax, excise taxes, etc. These are usually found in
cigarettes, alcohol, gasoline and clothing. All other forms of taxation are
called DIRECT TAXES (GST, HST, income tax) and are included as part of
the GNP calculation.
following formula is used to calculate GNI. GNI = W + R + I + P + D + IT
every dollar spent (GNE) equals every dollar earned (GNI), the following formula
is used as a calculation for GNP.
C + I + G
+ (E - M)
= W + R + i + P + D
Some important exceptions when deciding what is counted and what is not
part of the GNP calculation and some exceptions to the rule will be given in