Gross national product is the total volume of final services and goods produced during the year. It is expressed in money.
When determining gross national product, attention should be paid to the individual components of this definition. So, first of all, the indicator is a combination of final services and products. Thus, it is assumed that there are both “intermediate” and “non-final” goods that are not taken into account. The end product is one that is purchased for final use. Intermediate is also called the one that is acquired for subsequent resale or processing. In this regard, the gross national product is calculated using the final product.
At the same time, the indicator does not include the value of goods produced within the framework of domestic domestic economy in the shadow economy (despite the fact that it is manufactured for sale).
Gross national product is calculated in value form. The natural material form cannot act as an accurate indicator of the dynamics of economic development. For example, three tables and five costumes were produced during the year. The cost of the table is forty dollars, and the costume is twenty. And next year, five tables and three costumes were produced. If you calculate GNP in kind, it will be the same for both years and equal to eight units. When calculating in cash, in the second year the indicator will be greater than in the first.
It should be noted that GNP reflects only a general idea of the dynamics of the development of the economy, the economic condition of the state as a whole. At the same time, the potential of different countries can be compared. Welfare can be determined by comparing the indicator with the number of citizens living. Thus, per capita income is calculated.
The calculation of the indicator can be carried out by summing up all the expenses that consumers incurred in the process of acquiring final services and goods for a given year. The specified method is called the calculation of "costs" or "production".
The definition of the indicator can be done by summing up all the income received by the producers of services and goods for a given year.
With an accurate calculation of the gross national product, the same result should be obtained due to the fact that what is spent on the purchase of services or goods is the profit of their producers.
In accordance with the growth rate of the indicator, the dynamics of economic development is estimated. So, for example, if it increased by five percent, then the volume of manufactured goods in society increased just as much. The more services and goods will be, the higher, respectively, and GNP.
However, it should be noted that an increase in the indicator may not always indicate an increase in the physical volume of output. Situations in which there is an increase in value with a decrease in volumes are not uncommon in the economy. The calculation of GNP is carried out in cost form. It, in turn, depends directly on the level of emerging prices. A situation in which there is an increase in the indicator, despite a decrease in production volume, may occur provided that prices increase faster than the production of goods.
When calculating the gross national product at current prices, there may be a misconception about the economic condition and standard of living in the country. In order to make the picture of production dynamics more clear, the impact of inflation should be excluded when determining the indicator. In this regard, calculate the nominal and real GNP. Nominal provides for the definition of an indicator in the prices that are currently formed. The calculation of real GNP is carried out at constant prices.