Chapter 2 National Income - Part 2 Concept of GDP and GNP

Economics Class 12
Macroeconomics

It is total value of Goods and Services Produced by Country Residents

Hence, It includes factor income earned by Citizens from outside the country.

Also it reduces factor income earned by foreign citizens in India

Formula for GNP

GNP = GDP + Factor Income of Citizens working Outside Country - Factor Income of Foreign Citizens working in country

GNP = GDP + Net Factor Income from Abroad

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### Transcript

What is Gross National Product? It is total value of Goods and Services Produced by Country Residents Hence, It includes factor income earned by Citizens from outside the country. Also it reduces factor income earned by foreign citizens in India Formula for GNP GNP = GDP + Factor Income of Citizens working Outside Country - Factor Income of Foreign Citizens working in country GNP = GDP + Net Factor Income from Abroad GDP Gross Domestic Product It is Total value of Goods and Services Produced in Domestic Territory It includes Income earned by Indian Citizen in India Income earned by Foreign nationals in India It does not include Income earned by Indian Nationals Outside India GNP Gross National Product It is Total value of Goods ansd Services Produced by Normal Residents It includes Income earned by Indian Citizen in India Income earned by Indian Nationals Outside India It does not include Income earned by Foreign Nationals in India Example Income earned by Indian Citizen in India Income earned by Foreign nationals in India Income earned by Indian Nationals Outside India 1000 600 200 What Is GDP And GNP? GDP Total value of Goods ansd Services Produced in Domestic Territory = 1000 + 600 = 1600 GNP Total value of Goods and Services Produced by Normal Residents = 1000 + 200 = 1200 Second Method NFIA = 200 - 600 = -400 GNP = GDP + NFIA = 1600 + (-400) = 1600 - 400 = 1200 GROSS NATIONAL PRODUCT Total Value Income of all Normal residents Production of Final Goods and Services only (Without Any deduction of Depreciation) (Whether in India or Outside India) (Doesn’t have Income of Foreign Citizens working in India) (Not Intermediate Goods) Suppose in a country ,there are only 3 persons A,B and C A and B are working in the country while C is Outside Country Also D is a foreign Citizen working in the country Aggregate Value of Final Goods Produced of A,B, C and D is 1000, 2000, 2500, 4000 respectively What is GDP and GNP of Country? GDP Total value of Goods and Services Produced in Domestic Territory =A +B +D =1000+2000+4000 =7000 GNP Total value of Goods ansd Services Produced by Normal Residents =A +B +C =1000+2000+2500 =5500 Second Method NFIA = Income of C - Income of D = 2500-4000 = -1500 GNP GDP + NFIA = 7000 - 1500 = 5500