GNP (Gross National Product) 

Gross national product (GNP) is the market value of all goods and services produced in the national economy for a certain period (usually a calendar year).

Moreover, it does not matter where these services and goods were produced, domestically or abroad, the main thing is that they be part of the national economy, that is, belong to the country.

From the term “gross national product” itself, it is understood that we are talking about all the aggregate products that are part of the country's national products. But only the final product that was produced during the designated time period, usually a calendar year, is taken into account. Also, in 1993, the term was changed to Gross National Income (GNI), but the meaning has not changed. GNI can be considered a synonym for GNP.

GNP is part of special indicators that are part of the System of National Accounts (SNA), created by the UN specifically to reflect the economic condition of a country. The national economy in the SNA is displayed as a kind of general system, including the production, accumulation, redistribution and consumption of the product. And in the SNA, the Gross National Product is responsible for analyzing the monetary designation of the volatility of the country's national economy.

GNP includes:

1.  Products and services produced by domestic manufacturers inside and outside the country.
2.  Financial transactions, such as the purchase of shares or other valuable assets.
3.  Operations on the use of funds, including pensions, scholarships, money transfers, transfer of ownership.

There are several ways to calculate GNP. In this case, market prices are always used, that is, monetary indicators. Non-production transactions and intermediate goods are not included in the calculation of GNP.

For the calculation of the Gross National Product, several methods are used:

1. End-use method - for the cost of purchasing all manufactured final products for the year. This includes calculations for the use of goods and services, expenses for investments (for the purchase of new equipment and for the reimbursement of unusable equipment). Also, this includes general public finances for the production of services (calculation is carried out at cost) and all exports (all created domestically, but sold outside it).

2. Distribution method - calculation of income from all manufactured products for the year. Revenues calculated using this method include:

• • Salaries, social benefits, payments of private pension funds and payments on insurance policies.
• • Rent from the lease of land or real estate.
• • Interest payments on loans and deposits.
• • Profits of corporations and private enterprises.

3. The production method - the calculation of the amount of value added for all sectors of the national economy. This method includes:

• • Wage.
• • Interest on loans.
• • Costs for advertising services and products.
• • Profits of enterprises and corporations.
• • Depreciation.

In principle, regardless of which of these methods is used, the final result will be the same. The money that product buyers spend become the income of the product manufacturers.

It is also very important to note which indicators are not included in the calculation of GNP and why. This is necessary for a correct understanding of what cannot be part of GNP.

All types of non-production transactions are not included in the calculation of GNP, because they do not affect the changes in the national economy.

Non-production transactions are divided into several types:

1.  Financial operations of non-market production.
2.  Private transfer payments - a personal transfer of funds between two private individuals (for example, gifts).
3.  Transactions with securities - all kinds of operations of buying and selling shares (and other types of securities) are not part of national production.It should be noted that the money that is received from the issue and sale of securities periodically go to the purchase of investment products.
4.  Self-employment and housekeeping.
5.  Resale of supported products.
6.  Barter exchange of a product or service.
7.  Income from illegal operations and shadow business.

Also, it is important to know that the Gross National Product does not reflect:

1.  Distributed income between different segments of the population and their accumulation.
2.  The time spent by citizens of the country on work and leisure, as well as costs.
3.  Factors that are not part of the economy (natural, man-made).

Gross National Product is usually divided into several types:

1. Nominal GNP - the calculation is based on market prices that are relevant only at the moment, no adjustments for inflation are taken into account.
2. Real GNP - calculation is carried out taking into account the volatility of prices and inflation.
3. GNP per capita - this indicator reflects a more accurate state of the economy, because it calculates how much national product is connected to each citizen of a specific country

Many may confuse the Gross Domestic Product with the Gross National Product but this is a mistake, as they vary greatly

GDP reflects the welfare of a country's citizens and shows the total market value of domestically produced. While GNP is a monetary indicator on the volatility of national production, products and services that are produced both domestically and abroad.