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GNP and GNP

Gross National Product - This is the market value of the entire volume of goods and services created by producers of a given country in one year, both within their own country and in other countries.

Gross domestic product - This is the cost of all final consumption goods and services created in the country during the year, valued at market prices.

Included in GDP:

GDP includes only final goods intended directly for consumption, i.e., it excludes all intermediate goods used to produce final goods. Therefore, for example, GDP does not include the cost of grain, flour, yeast, which are necessary to obtain the final goods of bakery production. Otherwise, the cost of intermediate goods would be counted twice, since it is included in the cost of the final product.

Economic growth does not mean that real gross domestic product must necessarily increase every year; cyclical declines are acceptable, but in general the direction of the economy must be upward. To obtain a real result, GDP growth must be measured regardless of possible price increases, because with high inflation, prices can rise significantly, and production, on the contrary, can decrease. Therefore, in order to know how much the real production of goods and services has increased, the growth can be calculated in so-called constant prices.

Economic growth → economic and social progress. It means the growth of surplus product in the country → growth of profit - a source of further expansion and renewal of production and an increase in the well-being of the population.

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QUESTIONS:

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1. Establish a correspondence between the types of economic growth and their specific examples illustrating them: for each position given in the first column, select the corresponding position in the second column. Write down the resulting sequence of numbers.

	EXAMPLES		TYPES OF ECONOMIC GROWTH
A)	A tea company has hired more women to pick tea leaves from its plantations.	1)	extensive
B)	An oil producing company began developing a new oil field after depleting the old one.	2)	intensive
IN)	During the summer, a vegetable farm hired students and students as temporary workers to collect cucumbers and zucchini.
G)	The Japanese company has modernized its car assembly line.
D)	Due to the use innovative technologies Labor productivity at the enterprise has increased significantly.

Jacob Marshak (1898−1977) - American economist.

He studied at the Kiev Commercial School, then at the Technological Institute. Member of the Menshevik Party. Minister of Labor of Terk Soviet Republic. He graduated from the University of Heidelberg (1919), worked at the University of Berlin and the Kiel Institute of World Economics. He defended his doctoral dissertation at Oxford (1935). Worked at universities in New York, Chicago, Los Angeles. President of the American Economic Association (1977).

Early works are in the nature of Marxist socio-economic analysis.

He studied the economic behavior of the subject. He worked with statistical hypotheses and was interested in the issue of assessing information. Made a significant contribution to the development of econometrics. Developed a theory of decision making under conditions of risk and uncertainty.

Main works: “Economic Science and Information System” (1971), “Economic Information, Decision and Forecast” (1974), “Assets, Prices and Monetary Theory” (with Helen Makover, 1938).

The country's economic indicators clearly demonstrate how efficiently it is developing. How her income grew over a certain period of time. One such indicator is GDP. Experienced economists encounter it all the time. Let's look at what this indicator means and how to calculate it.

GDP is gross domestic product. This is an economic indicator that denotes the total market value of goods and services produced in the territory of the state in one year. It is used in calculations of a country's economic growth.

In simple words, GDP is the total market value of all final goods and services that are consumed in the territory of the state over 1 year.

When calculating this indicator, only those purchase/sale transactions that have been officially registered are taken into account. For example, a citizen is individual entrepreneur. He repairs household appliances. If all of its transactions were officially recorded through accounting, their figures will be included in GDP.

When calculating GDP, sectors of the shadow economy are not taken into account. That is, those goods and services that were produced informally.

It is also worth considering that the calculation of GDP does not include transfer payments and non-productive transactions. These include transfers from the budget as assistance.

Why does GDP take into account only the final cost of production?? This is necessary to avoid double counting of the indicator.

Let's look at an example. The farmer grew grain and then sold it to a flour mill. There it was ground into flour. It was sold to a factory or enterprise that deals with baking. Buns or bread were baked from it. After this, these products were sold. And the cost at which they were sold is taken into account when calculating GDP. She is the ultimate.

Why is GDP needed?

It reflects the economic state of the state. GDP influences the performance of stock indices, exchange rates on stock exchanges, state monetary policy and other sectors of life.

Also, do not forget that the higher the GDP, the lower the unemployment rate in the country. But this is a controversial issue. If GDP rises by at least 2% every year, the unemployment rate remains unchanged.

The higher the GDP, the stronger the national currency. This means that the welfare of citizens is growing. Is it really? Not really. The indicator cannot accurately determine the well-being of citizens. GDP can be significant in relation to each citizen, but the standard of living will be low.

Types of GDP

There are several varieties of Gross Domestic Product:

• nominal;
• real.

Nominal GDP- the cost of produced final goods and services in the region or the entire country, which is expressed in prices for the current period of time.

Real GDP— comparison of physical volumes of goods and services produced over a certain time period.

The difference between nominal GDP and real GDP is that the latter does not depend on the level of inflation. When calculating it, fluctuations in prices for products and services are not taken into account. And when calculating nominal GDP, the rise and fall of prices and the income of certain sectors of the economy are taken into account.

There is also another classification of GDP:

• Actual - when calculating it, underemployment of the population and realized economic opportunities are taken into account.
• Net - It shows the volume of all goods and services produced minus depreciation expenses.
• Potential - this indicator is calculated taking into account full employment of the population. He shows economic potential states.

When calculating the Gross Domestic Product, only official data from enterprise reports is taken into account various fields activities.

GDP structure

It includes all economic and social sectors, key sources of income. In addition, when calculating GDP, states take into account the GDP indicators of each region.

Indicators of Gross Domestic Product are calculated for the following sectors:

• extraction of natural resources;
• energy industry;
• Agriculture;
• construction;
• industrial manufacturing;
• transport industry;
• health and education;
• hotel and restaurant business;
• trade sphere;
• finance;
• other services.

For each year, the state provides data on what level the GDP indicator of a particular production or industrial area is at. Based on the obtained indicators, an analysis of the economic growth of the state as a whole is made.

What is GDP per capita

This is a macroeconomic indicator that reflects the state of all sectors of the economy in relation to each citizen of the state.

Formula for calculating GDP per capita:

Total GDP / number of citizens of the country

Let's look at an example.

Let's assume that the GDP for the year was 100 million rubles. The country's population is 10 million people. We calculate using the formula:

100 000 000 / 10 000 = 10 000

Therefore, GDP per capita will be 10,000 rubles.

Sometimes GDP is calculated only taking into account minors. In this case, the “equivalent of minors” is taken as a basis. What does this mean? Different weight measures are used. That is, than younger child, the less its weight.

GDP per capita indicators in Russia for several years

If we compare the figures of 2015 and 2018, GDP has grown significantly. That is, the economic situation in the country began to stabilize. The state supports the production of the national product. Accordingly, the domestic market does not suffer from a shortage of imported goods. It is also necessary to note the strengthening of the national currency in 2018.

How is GDP calculated?

There are several calculation methods:

• by expenses;
• by income;
• at added value.

They all give the same result. This is due to the fact that in the economy the amount of added value is equal to the cost of the final product, and total income is equal to the amount of total expenditure. Let's look at each of these methods.

Calculation of GDP by expenditure

This method of counting is called the “end-use method.” When calculating GDP based on expenses, the sum of expenses of all agents is taken into account. These include the following expenses:

• investment;
• government;
• consumer;
• foreign sector expenditures (net export expenditures).

GDP is calculated using the formula:

Where:
I– investment costs;
G– government expenditures (purchase of goods, payment for services);
C– consumer spending;
Xn– expenses on net exports (foreign sector).

In other words, The cost calculation method takes into account the amount of final consumption(costs of country residents to purchase goods or pay for services), investment capital(investments for production improvements, other investments to increase the profit of the enterprise); government expenses for paying salaries of employees of budgetary organizations, defense expenses, etc. Also for calculation, determine the net export indicator. To do this, the amount of imported goods is subtracted from the amount of goods sent abroad.

Calculation of GDP by income

This method is called "distributive". When using it, the following factor income indicators are taken into account::

• wages, bonuses, incentives and the like;
• rent/rent (income received from renting out property);
• interest payments, which are income from capital investment;
• profit of enterprises and organizations (corporate and non-corporate sectors of the economy).

Also taken into account when calculating two indicators that are not factor incomes. These include indirect taxes and depreciation.

Formula for calculating GDP by income:

Salary + rent + interest payments + enterprise profits + owner income + depreciation + indirect taxes

Imputed rent must be included in the rent figure.

Calculation of GDP by value added

In this method, the calculation uses indicators of added value of products minus tax payments and contributions. The value added indicator is calculated as the difference between revenues and expenses. Then the obtained values ​​are summed up.

Let's look at an example.

The farmer sold grain to the miller 10 rub./kg. He, in turn, ground it and sold it to a bakery for 15 rub./kg(DS = 5 rub.). The bakery baked bread and sold it to the store for 19 rub.(DS = 4 rubles), and the store sold bread at a price of 25 rubles. (DS = 6 rubles). The total amount of added value was 15 rub.

Dynamics of Russia's GDP

According to Rosstat, the index of physical volume of GDP has changed since 2014. Changes became noticeable already in 2016, when the indicator initially had a negative value, and then a positive one.

In 2014-2018, there was a reduction in the share of household expenditures on final consumption of goods and services. The share of exports increased, which could not but have a positive impact on the country's economy. However, in 2016-2017 the share of remuneration to employees decreased. This means that unemployment has increased. GDP did not reach the required value. Therefore, in 2016 its indicator is not too different from 2014.

As for the 2018 GDP, its indicator has increased significantly compared to previous years. The national currency strengthened, the GDP growth rate was 102.3%. Its value reached 103,876 billion rubles.

GDP is gross domestic product...

Gross domestic product (GDP) is a general measure of output that is equal to the sum of all gross production values ​​of resident institutional entities related to the production process (including taxes, but excluding subsidies for goods/services not included in the cost of the final product). This definition is official according to the Organization for Economic Co-operation and Development (OECD).

The GDP calculation is usually used to measure the level of productivity of an entire country or a specific region. Also, the GDP indicator can show the relative contribution of a particular industrial sector to the total production volume in the country. Determining the relative contribution of economic sectors through the gross domestic product indicator is possible because this indicator reflects value added rather than total revenue. The calculation involves summing up the added value of each firm in the analyzed region (the cost of the final product minus the cost of the products used in production). For example, a firm buys steel to produce a car, thereby creating added value. If, when calculating GDP in this situation, the cost of steel and machinery were summed up, the final figure would be incorrect since the input cost of steel would be calculated twice. Because it is based on value added, GDP increases when firms reduce the use of inputs or other inputs (intermediate consumption) to produce the same amount of output.

A more common way to calculate GDP is to calculate economic growth from year to year (or from quarter to quarter). Changes in GDP growth reflect the success or lack thereof in economic policy, used in the country. Also, by looking at GDP growth, you can determine whether a country’s economy is in a recession.

History of GDP

The concept of GDP was first discovered by Simon Kuznetz in a report to the US Congress in 1934. In this report, Kuznetz cautioned against using GDP as a measure of well-being. After the Bretton Woods Conference in 1944, GDP became the main tool for measuring the size of the economy.

Before the GDP indicator became widely used, the gross national product (GNP-Growth National Product) was used to analyze the performance of the economy. The main difference from GDP is that GNP measures the level of production generated by the citizens of a certain state, both within the territory of that state and abroad. GDP, in turn, measures the level of production of “institutional entities,” that is, entities located within the country. The transition from using GNP to GDP occurred in the mid-90s.

The history of the concept of gross domestic product is divided into stages according to the methods for calculating this indicator. The amount of value added by firms is relatively easy to calculate. It is enough to check the movement of accounts and financial statements. However, the value added by the private sector, financial corporations and the value added generated by intangible assets is a technically difficult quantity to calculate. These types of activities are very significant for developed economies and the international conventions that are the basis for these calculations very often change to comply with industrial changes in the non-material sectors of the economy. In other words, the GDP indicator is a product of complex mathematical calculations and manipulations of data sets to be presented in a form acceptable for further analytical actions.

GDP formula

GDP is the monetary value of all finished goods and services produced in a country during a given period of time. GDP is usually calculated at the end financial year. This indicator includes all private and public consumption, government spending, investment and exports less imports.

Standardized GDP formula:

AD=C+I+G+(X-M)

AD (aggregate demand) - total demand

C (consumption)

I (investment)-investment

G (government spending) - government spending

X (export)-export

M (import)-import

This formula shows the main theoretical components of general demand in the economy. Total demand is the sum of all individual purchases made in the economy. In a state of equilibrium, total demand must be equal to total supply - the total volume of production in the country, which is the GDP indicator.

Thus, GDP (Y) includes consumption (C), investments (I), government spending (G) and net exports (X–M).

Y = C + I + G + (X − M)

The following is a description of each of the components of GDP:

1. C (consumption - consumption) is the most significant component in the economy. Consumption consists of private consumption (consumption or costs incurred by final consumers). Private sector consumption is in turn divided into different categories: durable goods, non-durable goods and services. Examples include: rent, household goods, gasoline, medical expenses, but non-consumption is not, for example, the purchase of real estate.
2. I (investments - investment) includes, for example, a company's investment in equipment, but excludes the exchange of existing assets. Examples of investments include the construction of a new mine, the purchase software or purchasing equipment and machines for a factory. Expenses of individuals associated with the acquisition of new real estate are also investments. Contrary to popular belief, the term “investment” has nothing to do with the purchase of financial instruments. Purchasing financial products is classified as “saving” rather than an investment. This terminology allows us to avoid duplication of transactions when calculating GDP: if a person buys shares of any company and the company uses the funds received to purchase equipment, then the figure taken into account when calculating GDP will be the cost of purchasing the equipment, but not the cost of the transaction when purchasing shares. The purchase of bonds or shares is only a transfer of funds and is not directly the cost of purchasing products or services.
3. G (government spending- government spending) – this is su mma of government expenditures on final services or products. These include salaries of public sector employees, purchases of weapons for military purposes and any investments made by the government.
4. X (export - exports) represents the gross volume of goods and services supplied abroad. Since the theoretical meaning of the GDP indicator is to measure the level of production generated by domestic producers, it is necessary to take into account the production of goods/services exported to other countries.
5. M (import - imports)— the part of the GDP calculation that represents gross imports. The gross domestic product indicator is reduced by the volume of imports, since goods and services supplied by foreign suppliers are already included in other variables ( C, I, G).

A fully equivalent definition of GDP(Y) is the sum of final consumption expenditure (FCE), gross capital formation (GCF), and net export (X-M).

Y = FCE + GCF+ (X − M)

FCE can in turn be divided into three components: consumption costs by individuals, non-profit organizations and government). The GCF is also divided into five components: non-profit corporations, government, individuals, for-profit organizations and non-profit organizations targeting individuals). The advantage of the second formula is that costs are systematically divided by type of end use (final consumption or capital formation), as well as by the sectors making these expenditures. The first GDP formula mentioned only partially separates the components.

Components C, I And G– these are the costs of final goods and services, the costs of intermediate products are not taken into account (intermediate goods and services are used by companies to produce other products and services during the financial year).

Example of GDP components

C, I, G, And NX(net export): if individual renovates a hotel to increase the flow of future guests, then this expense is considered a private investment, but if the person owns shares in the construction company - the contractor, then this expense is considered a savings. However, when the contractor settles payments with its suppliers, this will be included in GDP.

If the hotel is a private property, the renovation costs will be considered consumption, but if the municipality uses the building as an office for government employees, then this cost will be considered government expenses. spending or G.

If during the reconstruction the component materials were purchased abroad, then these costs will be taken into account in the items C, G, or I(depending on whether the contractor is a private person, a municipality or a legal entity), but after this the “import” item will be increased by the amount of costs, which means a decrease in the final GDP indicator.

If a local manufacturer produces components for a hotel abroad, then this transaction will not apply to C, G, or I, but will be taken into account in the “export” item.

GDP calculation

GDP can be found in three ways, which in theory should give the same result. These methods include: production (value added method), income and cost methods.

The easiest method to carry out calculations is the production method, which sums up the goods and services produced by each type entrepreneurial activity represented in economics. The cost method of calculating GDP is based on the principle that the produced product must be purchased by someone, thus the cost of the final product must be equal to the total costs incurred by the citizens of the country being analyzed. The income approach, in turn, is based on the assumption that the income of production factors (producers) must be equal to the cost of production. Thus, using this approach, GDP is calculated by adding the income of all producers.

Nominal and real GDP

Gross domestic product can be of two types. Nominal GDP shows the total value of all goods and services produced in the country during the year, without taking into account their rise in price (inflation) over this period. A more useful type of gross domestic product indicator for economic analysis is real GDP. Real GDP is the measure of goods and services produced in a country over a year, taking into account the annual inflation rate. For example, if the growth of nominal gross product is 4%, and the inflation rate is 2%, then the real GDP indicator will be 2% (4% - 2% = 2%).

Investocks explains "GDP-Gross Domestic Product"

The standard measure of calculation is GDP growth, which is measured as a percentage (increase monetary value goods and services produced). GDP is usually used as an indicator of the economic health of a country and also to measure the level of economic development states. Often the GDP indicator is criticized because the calculations do not take into account the shadow economy - transactions that, for one reason or another, are not brought to the attention of the government. Another disadvantage of GDP is the fact that this indicator does not measure material well-being, but serves as a measure of productivity in a country.

Thus, gross domestic product is an indicator of the overall level of production. Often, analysts use GDP growth, which is calculated through changes in the annual output of the economy (gross domestic product).

GDP level or gross domestic product(English) Gross Domestic Product, GDP) – an indicator reflecting the market value of all final services and goods produced for the year of interest in all sectors of the economy in the territory of the selected state (for consumption, accumulation and export). At the same time, the level of GDP does not take into account the nationality of production factors (natural, raw materials, labor resources, etc.).

The rate of change in GDP is the main tool for assessing the state's economy. GDP can be expressed either in a country's national currency or, for comparison purposes, in US dollars.

What do “gross” and “domestic” mean?

“Gross” means that GDP measures all production, regardless of its purpose. Production may be for immediate consumption, investment in new fixed assets, or for replacing impaired fixed assets. “Domestic” means that GDP measures production within the territory of one country.

Types of GDP

There are several types of GDP:

• Nominal GDP

Nominal GDP is calculated at current prices and does not include inflation.

• Real GDP

This is nominal GDP adjusted for inflation.

• GDP at purchasing power parity per capita

GDP per capita (simplified) = the value of all goods and services produced by the inhabitants of a country, expressed in US dollars / the total number of those inhabitants. The PPP value of GDP better reflects the state of affairs in the state than nominal GDP.

What does GDP consist of?

The structure of the GDP of any country consists of goods with tangible and intangible expression (services) produced in this country over the year for the end consumer. This includes the total cost of cars or machines produced, and the cost of baked bread, rolls and cakes, and the cost of lectures given at universities and patients treated in clinics.

How is it calculated?

There are many ways to measure GDP. Today, two main principles of calculation are used:

• profitable - summing up the cost of manufactured products;
• expenditure – summing up the funds spent during the year.

If calculated correctly, both amounts should be approximately equal.

Why does a Forex trader need a GDP level?

Currency analysts do not operate with the absolute value of the GDP level, but with the rate of its changes, which is expressed as a percentage relative to the previous quarter or year. GDP growth indicates the stability of the economy and, as a result, implies an increase in the exchange rate of the national currency. And, conversely, a decline in GDP indicates problems in the economy and causes a depreciation of the national currency.

To determine the state of economic well-being of a country, there are a significant number of different criteria with the help of which the country’s macroeconomic indicators are compiled. There are also those that relate to psychological, social and others. But in this article, only those that indicate the level of economic prosperity are of interest, or rather, two of them: gross domestic product and gross national product. AND main question: What is the difference between GDP and GNP? In most countries of the world, these indicators do not differ much from each other. But there is a difference between them, and within the framework of the article it is necessary to find out how much the values ​​​​differ when calculating, why they are calculated and, finally, what is the meaning of these parameters, and what are these macroeconomic indicators in general.

What's happened

Gross domestic product refers to the total value of all produced material goods and services rendered that were provided and brought into a state of readiness for sale. Moreover, products made within the borders of a certain country are taken into account. This is the main difference between GDP and GNP. Counting is carried out in nominal banknotes. But conditions should be taken into account, because sometimes products can be included in GDP, and sometimes they cannot.

Example of calculating GDP

So, if there is a certain plant that produces semi-finished products and exports them abroad, then total cost semi-finished products produced by the enterprise will be added to the gross domestic product. But if the plant uses them in the future itself to manufacture more advanced and necessary products that will be exported, then the cost of the further product (the very final one, ready for external sales) will be added to the value of GDP. It should be said separately what real and nominal GDP/GNP are. The second means what is currently available, while the first means what it should be as a result of dividing GNP by the general price level. Quite confusing for a non-expert. The main difference that needs to be understood when studying GDP and GNP is the territorial aspect of the calculation.

What is gross national product

The gross national product is understood as the total value of material goods and services that were produced and provided by representatives of one people throughout the entire Earth. Compared to calculating gross domestic product, it is more labor-intensive and only gives a relative idea of ​​the standard of living. It’s all because of the use of money: for example, if a person moved to another country and started business there, GNP takes into account the income that he brings to the state, but this income is brought to a completely different person, from whom his homeland does not receive direct taxes and investments in the economy . A bypass effect is possible when money earned abroad is transferred to the homeland, but even this option is not optimal from the point of view of using human potential. How GDP differs from GNP should already be clear at this stage; if not, you need to read the previous two paragraphs.

How is GDP calculated?

Gross domestic product for a certain year is calculated in this way: the market value of all products produced by a country is summed up in a certain monetary value, which is ready for sale and use abroad by the enterprise that produced it. Here we should digress and talk about the so-called positive shadow sector of the economy. Calculating the real gross national product of a country is very problematic.

Positive shadow GDP

Usually you can learn from TV screens, newspaper pages, on the radio, and on the Internet that the shadow sector is always bad. But only illiterate people can say that. Let's give an example: you have a garden of ten acres, and it was planted with potatoes, carrots, radishes, herbs and other crops. Time has passed, the time has come to harvest. Vegetables collected from plots do not openly contribute to the gross domestic product, therefore, technically, this is part of the shadow sector of the economy - the production of products without imposing taxes. But it is grown, as a rule, for one’s own consumption; it does not harm society, but can only reduce the profits of individual entrepreneurs. It is situations like this that make up the positive shadow sector of the economy. Why was this told? The point is that in different countries around the world there have been and, perhaps, there will be more attempts to determine the boundaries of this sector and add it to the gross domestic product (or gross national product), but so far, due to the impossibility of obtaining accurate data on the volume of work, such a calculation has not been carried out. Measurement of GDP and GNP is carried out in local currencies for “their” investors, and in US dollars for reporting data to international ones. Conversion is carried out at the official exchange rate.

How is GNP calculated?

The gross national product is calculated based on the data provided by people who have citizenship of a certain country, or, if there is a division into nations (provided for in passports), then on the basis of the income of representatives of one nation. This calculation technique is necessary to obtain information about the state of the state-forming masses as a reason for judging the state of affairs in the power itself.

Who calculates the gross domestic product?

GDP is calculated by two organizational forms: private and public. The tax and customs services and various statistics committees help the state collect the required information. The information they collect is quite accurate. But there are a number of pitfalls here that spoil government statistics. Among them: submission of false data by managers or owners of enterprises, deliberate falsification of data by the government or its subordinate structures. In world practice, it has been noted that owners of enterprises in capitalist countries have a tendency to reduce data, and increasing indicators is of interest to managers in countries with a significant public sector, such as in China, where scandals arise over and over again about enterprises overestimating their profitability and turnover indicators.

How do private structures count?

Private structures operate using other methods. They carry out calculations based on official data, but at the same time they check the data provided by other states on the amount of turnover, check with the data of banking institutions and other private structures that have access to the required type of information, and based on a comprehensive assessment they already make their own conclusions about the value of gross domestic product and provide their subjective judgments about the consistency of government data real situation business The calculation of GDP and GNP is carried out by them in order to provide additional confirmation of the financial capabilities of the power, as well as as an indicator of how trustworthy the country’s government can be from the point of view of a foreign investor.

Who calculates the gross national product?

GNP is calculated using almost the same methods as GDP, but the scale of action changes. Thus, if the gross domestic product is calculated for a certain territorial unit, then when calculating the gross national product it is necessary to take into account what is relevant to the people for whom the indicator is calculated.

The concepts of GDP and GNP are not very different for most countries, even when calculated by private entities. Although for some there are still differences, and they are huge. One of these states is Tajikistan, which receives 60% of its gross domestic product from the work of economic migrants. Thus, the gross national product of this country is a multiple of GDP.

Why is GDP calculated?

There are quite a few methods for calculating gross domestic product. Initially, the state wants to know the potential of the economy in order to be able to plan further consistent development state formation. Also, a comparison of gross domestic product indicators allows you to view the progression and stability of its development. That is, data is provided by which potential investors will decide whether the country meets favorable indicators for them and whether it is worth investing in a project.

GDP is based on a number of other indicators that show the overall level of living comfort, a person’s ability to realize their talents, the level of social security and many other aspects of life. One such indicator is the Human Development Index. But even if things are going badly in a country, then calculating the gross domestic product has a certain meaning: it uniquely shows the level of openness in the country, and although in moments of decline it restrains investors’ investments and causes panic among them, when growth begins it can provoke those who invests money in assets that have reached the lower level of value, and, using the snowball principle, cause economic growth. GNP and GDP indicators are valuable precisely as indicators of a country’s level of development, indicators of possible potential that can be worked with and which can be developed, converting into profit.

Why is GNP calculated?

The main purpose, which should only be mentioned, is to find potential reserves. The fact is that migrants who have left the country and are conducting economic activities in the territory of another state can transfer money to their homeland. And ideally, having saved up more money, they can return home and open their own business, creating jobs and thereby revitalizing economic life. But the problem is that although they try to take everyone into account, a rather small number returns to their homeland, so it is impossible to consider the entire potential as usable. Typically, various models take into account rates from 20 to 80 percent. Data is used to identify groups of people who are most likely to return.