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Each sector contributes to GDP through its value added.
5.8 Gross National Product (GNP)
Gross National Product (GNP) measures the total value of goods and services produced
by a country’s residents, regardless of where production takes place.
GNP = GDP + Net Factor Income from Abroad (NFIA)
5.9 Net Factor Income from Abroad (NFIA)
Net Factor Income from Abroad represents the difference between income earned by
residents from abroad and income earned by foreign residents domestically.
5.10 Difference Between GDP and GNP
GDP focuses on the location of production, while GNP focuses on the nationality of
producers.
5.11 Importance of the Output Approach
The output approach helps measure real production, analyze economic growth,
compare countries, and design economic policies.
5.12 Summary
The output approach measures economic activity through production. GDP measures
domestic production, while GNP adjusts for international income flows. The concept of
value added ensures accurate measurement and avoids double counting.
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