GROSS NATIONAL PRODUCT

There are many ways to measure the economic health of society. The best available indicator of the economy's overall health is its annual total output of goods and services. To calculate the output of goods and services, economists use two closely related basic national income accounting measures of the full goods and services output. One is the gross national product (GNP), and the other is called the gross domestic product (GDP). Both of these measure the total market value of all goods and services produced in the economy in one year. The difference between the GNP and the GDP is in how the economy is defined.

The GNP consists of the total output produced by land, labor, capital, and business talent supplied by U.S. industries. Since 1992 the GDP has generally replaced the GNP and comprises the value of the total goods and services produced within the boundaries of the United States, whether by U.S. or foreign-supplied resources. Measuring the overall production performance of the economy as a whole does what accounting does for an individual business enterprise: it tells the government executive how well the business of the country is performing. Whether one uses the GNP or the GDP, such measuring provides national income accounting, so as to keep a finger on the economic pulse of the nation, compare annual figures over time, and help plan for future budgeting and the creation of new public policies to improve economic performance.

See also: Gross Domestic Product

gross national product (GNP) Total market value of all goods and services produced by a country annually, plus net income from abroad. GNP is a universal indicator of economic performance, and provides an assessment of different economic sectors. GNP is the sum of four types of spending: private consumption (goods and services bought by the community), government expenditure, balance of trade, and business investment. See also gross domestic product (GDP)

Gross National Product (GNP) An unduplicated measure of the total flow of output in any economy during a specified time-period. Unduplicated means that the measure excludes intermediate goods and services that are used as inputs in the production of further goods and services—such as the use of flour to make bread for sale. The aim is to measure final products—the consumer goods and services which constitute the ultimate aim of all productive work. It is accepted by economists that GNP excludes large amounts of consumption work and other types of work. See also INFORMAL ECONOMY.

gross na·tion·al prod·uct (abbr.: GNP) • n. the total value of goods produced and services provided by a country during one year, equal to the gross domestic product plus the net income from foreign investments.