Understanding GDP, GNP, GNI

GDP Gross Domestic Product A broad measure of an economy’s performance The total value of ALL goods and services produced IN a country each year ALL economic output (foreign and domestic) ‘per capita’ means per person GDP per capita = GDP total / population

GNP Gross National Product Value of goods and services produced by a country’s citizens, regardless of where they live. Tries to isolate economic activity of foreign- owned firms Only calculates the nationally owned companies, regardless of where they are located

GNI The total value of goods and services produced within a country together with the balance of income and payments from or to other countries. Increasingly preferred over GDP and GNP

FLAWS GDP, GNP, GNI are almost always reported in US dollars. Currency exchange rates can sometimes affect reports in other countries Per capita measures also do not reflect purchasing power of money in a country Purchasing power is what you can get for your money in a country

PPP Purchasing Power Parity The number of units of a country’s currency needed to buy the same amount of goods and services as $1 would buy in the United States Includes a wide range of things: food, transport, clothing, housing Measures what people can actually afford