NATIONS OUTPUT

Gross National Product

(GNP)
Is considered as the most important
indicator in measuring the
development of the economy.
Is the accumulation of all the
products and services produced in
the country.
Refers to the total market value of all
the final goods and services
produced in the country for a given
period of time.

POTENTIAL GNP
Is the estimated total production
of the country based on the
productivity and capacity of the
factors mentioned earlier. It is
the goal of the economy of the
year. At the end of the year, the
production of the country is
measured, and it represents the
actual GNP.

ACTUAL GNP
Is the amount of produced goods
and services attained in a
country for one year. It serves as
a barometer if the economy has
been effective in maximizing the
use of the natural resources,
machineries, and workers in
achieving the potential GNP.

NOMINAL GNP

GNP at current prices.

It refers to the total
production of the country
based on the prevailing
price in the market.

REAL GNP

GNP at constant prices.

It is the value of the
countrys production
based on the price in a
given base year.

To compute the growth rate, the

formula is:
GNP of present year GNP of previous
year
GNP of the previous year x100

GROSS DOMESTIC
PRODUCT (GDP)
It refers to total market value of
goods and services produced
within the country in a given
period of time. All the production
within the country is included in
our GDP, even if a foreigner
produces it for as long as it is
done inside our country.

APPROACHES TO GNP
MEASUREMENT

1.Final Expenditure Approach

The economic sectors like
household, government,
business firms, and foreign
market have their own
expenses, which are
significant in measuring the
GNP.

a. Government
Expenditure (G)
The government spends for the
salaries of the employees of the
government like doctors, nurses,
teachers, clerks, senators,
congressmen, judges, and even the
president. Expenses for
infrastructure projects like bridges,
roads, hospitals, and school buildings
and the like, travelling expenses of
the president, the delivery of social

b. Personal Expenditure
(P)
Household expenses for
food, clothing, housing,
jewelry, appliances, and
other products and services
for personal consumption are
classified as personal
expenditure.

c. Business Expenditure
(B)
Businessmen invest in fixed
capitals like machineries,
buildings, office equipment,
changes in stocks and
inventories. These are all
considered as business
expenditure.

d. Net Export
The exports and imports are the
main determinants of this
component. In order to determine the
countrys spending on foreign goods
and services, the expenses in
imports (M) are deducted from the
expenses in exports (X). It will be
positive if the exports are higher than
imports.

e. Net Factor Income From

Abroad (NFIA)
It shows the difference between the
income of the Filipino workers abroad
as factors of production and the
income of foreigners working in our
country as factors of production.
When the income of the OFWs is
higher than the foreign workers,
there is a positive result, but if the
foreign workers income is higher
than OFWs, there is a negative

f. Statistical Discrepancy
(SD)
The errors in measuring the
GNP represents this component.
Any discrepancy that cannot be
determined and the
components traced will be
considered as a discrepancy in
the computation.

 If all the expenditures mentioned

above are put together, GNP will be
computed. The formula for
measuring the GNP using this
approach is:
GNP= G + P + B + ( X M ) + NFIA +
SD

FACTOR INCOME APPROACH

Each factor of production receives
payment for its services and this
serves as income. The various
payments are rent for land, wages
for workers, interest for capital, and
profit for entrepreneurs. If the factor
income are combined together, the
result is the National Income (NI).

a. Compensation of
Employees (CE)
Compensation of Employees (CE)
includes all the benefits, commission,
allowances like Cost of Living
Allowance (COLA), clothing, and
transportation allowances, personal
emergency allowance or PERA, non
monetary benefits, payment
according to the contract of
employees, and salaries that
employees receive on specific time

b. Entrepreneurial Income
(EI)
Payment receive by an
individual, which is not
classified as wage or salary.
This is the income of the
entrepreneur as a factor of
production. The income from
property such as dividends
belongs to this component.

c. Corporate Income

Income received by
corporations and funds
intended for business
expansion represent the
corporate income.

d. Government Income
All the income received by the
government such as taxes,
income of government-owned
and controlled corporations, and
the interest earned in loans
provided by the government are
considered government income.

 The combination of all components

will sum up as National Income.
The formula for National Income (NI)
is:
NI = CE + EI + CI + GI
To be able to measure the GNP, we
will add the other production
expenses such as:

a. Capital Consumption Allowance

(CCA)

It refers to the fund for

depreciation intended for
buying new machineries and
facilities. Gradually, capital
goods will reach the period
of depreciation and become
worn out.

2. Indirect Business Taxes

(IBT)

Indirect tax imposed on

the products and
services made after the
subsidy has been
deducted.

 In general, GNP can

be measured with the
used of the formula:
GNP = NI + IBT +
CCA