GNP - gross national product - this is the main indicator characterizing the economic activity of a state. The main condition is that domestic resources of the country should be used, regardless of where the producer is located. The GNP calculation formula shows at what level the state is in terms of economic development.
Definition
In economic theory, it is customary to talk about the Gross National Product as the total market value of all goods and services produced by residents and simply residents for a certain period of time (for a year). When calculating the GNP formula, the following nuances must be taken into account:
- the term "gross" means aggregate, which means that literally all goods and services will be summarized;
- calculation is always made in cash;
- when calculating, all intermediate goods or services are not taken into account, we are talking only about those that are delivered to the final consumer;
- the GNP calculation formula does not take into account financial transactions and trade in goods that were already in use.
Methods
GNP can be viewed from three perspectives. The simplest thing is to collect all the goods and services produced in cash and calculate how much each resident of the state spent on them.
Of course, the data will be taken from the declarations submitted by registered enterprises. The formula for calculating GNP is called distribution.
The second way is to consider not income, but the cost of the added value of the product. In the process of manufacturing goods and services, each company incurs costs: salary, depreciation, equipment. If you add these amounts, we will evaluate the level of the economy. But raw materials are not taken into account, since they are the final product for other firms specializing in their production.
And the third method is to consider only raw material costs. The formula for calculating GNP is called distribution.
If you calculate GNP by these three methods, then the result should be the same.
The formula for calculating GNP by expenses
It looks like this: GNP = PM + VI + HR + E h
Here:
LS = personal expenses of consumers.
VI - total investment within the country.
GZ - government spending on purchased goods and services.
E h - net export.
We give a brief description of each of the components.
Personal consumer spending is the cost of households buying essential goods, which includes food and clothing, furniture, appliances, and luxury goods. Also, all provided services of any nature are taken into account. The only exception is real estate. It is not taken into account in GNP.
Gross domestic investment includes the following categories:
- investment in improving the production process;
- in construction;
- in stocks.
The total Ig score is calculated as the sum of additional investments for the year plus depreciation costs.
Public procurement takes into account the costs of the state apparatus, including schools, hospitals, armies, and administrative structures. The exception is transfer payments.
Net export is the difference between the number of products exported and imported. If export exceeds import, the indicator will have a monetary value. Otherwise, the value will be negative.
The formula for calculating GNP by income
It looks like this: GNP = RFP + P +% + Pr + AO + NB
Here:
- salary.
P - rent.
% - percent.
Pr - profit.
AO - depreciation.
NB - indirect taxes on business.
In economic theory, all revenues that are taken into account when calculating this method are conventionally divided into two groups:
1. Income as a production component. Depending on the method of preparation, they are divided into:
- Salary - each person receives for his work. White salaries reflect realities, but black and shadow transactions worsen the value of the indicator, since they are not officially taken into account.
- Rent - the income of individuals and legal entities from the surrender of land or real estate. Only transactions officially confirmed by documents are taken into account. All those who do not work officially violate the procedure for calculating GNP.
- Percentage is the amount of return on investment.
- Profit - the difference between income and expenses from entrepreneurial activity.
2. Payments that are not related to the payment of income:
- depreciation is the amount that is accrued as a percentage of the cost of production equipment for the purpose of their replacement and repair;
- indirect taxes on business - this is such a percentage of the cost that is accrued additionally, regardless of the main tax. This includes: excise tax, property tax, license, customs duties.
Method for calculating GNP by value added
The formulas for calculating GNP and GDP have the same basis. Except for the last value added method. We will deal with him.
This method takes into account only those costs incurred by the enterprise for the manufacture of the final product, except for the cost of raw materials. Raw materials are the final product of another organization: a farm or a raw material industry. For them, this is a finished product that will so itself take into account the cost of manufacturing.
Value added includes amounts spent on:
- wages;
- Depreciation
- transport;
- advertising;
- loan repayment percentage;
- and also includes profits.
The method of calculating GNP by value added allows you to characterize economic activity by industry. The results indicate the degree of development of a particular industry.