Gross National Product (GNP):
An economic statistic that includes GDP, plus any income earned by citizens (importantly
companies) of a country in foreign land, minus income earned within the domestic economy
by overseas residents.
GNP measures total production of resources owned by citizens of a country. Some citizens
own resources that do their production in the foreign sector.
Total value of Goods and Services produced by all nationals of a country whether within or
outside the country in given time. GNP records income produced (e.g. sales).
GNP is the total value of all final goods and services produced within a nation in a
particular year, plus income earned by its citizens (including income of those located
abroad), minus income of non-residents located in that country. Basically, GNP measures the
value of goods and services that the country's citizens produced regardless of their location.
GNP is one measure of the economic condition of a country, under the assumption that a
higher GNP leads to a higher quality of living of a country, all other things being equal.
National Income
There three methods of measuring National Income are;
1. The income method
2. The output method
3. The expenditure method
All three methods should equal each other as output (production) pays for wages (incomes)
which are spent (expenditure) on output. However there can by stastistical discrepancies
(small differences) due to the different methods used.
Three methods are used to ensure that there is;
1. Accuracy: using three methods gives a more accurate result.
2. A cross-check: estimates under one method can be cross-checked under the other two
methods.
3. Each method brings valuable information lacking in the other two and the
government uses this to make decisions relating to the three sectors of the economy.
1. The Income Method
Is a supply-side analysis which focuses on all factor payments made to households; planners
need to know this information in order to assess the levels of taxes and transfers that are
appropriate for given families. It involves adding up the incomes received by each of the
factors: land, labour, capital and enterprise in each of the three sectors agriculture, industry
and services.
Precautions for the Income Method
Income-in-kind/benefit in kind
 Payment received in a form other than in cash/non-monetary form.
 Payment in the form of goods and services.
 They are included in National Income statistics.
 Eg. Company car
Transfer payment/earnings
 Is money received without the supply of goods/services.
 Payment for which no factor of production is supplied.
 They are not included in National Income statistics.
 Eg. Job-seekers allowance
Imputed rent


If you own a house, you are assumed to be receiving an income equal to the amount
you could get if you let it out for rent.
This is included in National Income Statistics.
2. The Output Method
Is also a supply-side analysis which focuses on the payments received from the supply of
goods and services. Understanding the outputs of different sectors is vital for infrastructural
advancement, research and development (R&D) clusters, export competitiveness. It involves
adding up the output produced by each of the factors: land, labour, capital and enterprise in
each of the three sectors agriculture, industry and services.
Precautions
Double counting
When using the output method, care must be taken to avoid “double counting”.
If a dressmaker buys material for €100 and makes a dress worth €00, their output is only
€200. This is known as the value added of the business.
Only goods & services for which payment is made are included so the efforts of charity
workers and home- makers are excluded.
3. The expenditure method
Is often associated with the writings of Keynes and unlike the other two, focuses on the levels
of demand in the economy and it allows planners to assess the balance between investment
and consumption, public and private activity, imports and exports (the balance of trade) etc. It
involves adding up the spending by each of the factors: land, labour, capital and enterprise on
the goods and services on the economy.
Relationship between
GDP @ CMP and NNP @ FC
GDP at current market prices
± Net Factor Income from abroad (ROW)
= GNP at current market prices
Less indirect taxes
Plus subsidies
= GNP at Factor Cost
Less Depreciation
= Net National Product at Factor Cost (NI)
Relationship between
NNP @ FC and GDP @ CMP
Net National Product at Factor Cost (NI)
Plus Depreciation
=GDP at Factor Cost
+/- Net Factor Income from abroad (ROW)
= G.N. P. at Factor Cost
Plus indirect taxes
-Less subsidies
= GNP at Market Prices
Explanation of terms
Gross Domestic Product at Current Market Prices
Is the output produced in one year in by the factors of production in the domestic economy
irrespective of whether the factors are owned by Irish nationals or foreigners at current
market prices.
+/_Net Factor Income from the Rest of the World
Is the difference between incomes earned by foreign factors of production in Ireland and send
abroad and income earned by Irish factors of production abroad and returned to Ireland.
Gross National Product at Current Market Prices
Is the value of the total goods and services produced in one year in an economy by Irish
owned factors of production valued at current market prices (excluding subsidies and
including taxes).
It includes earnings of Irish factors abroad but excludes earnings/profits of foreign factors in
Ireland that are sent home (repatriated).
GNP is less than GDP when;
Net Factor Income from the Rest of the World is negative.
This is due to:
• Repatriation (sending home) of profits by foreign companies resident in Ireland. Eg.
Intel
• Repayments on the foreign element of our National Debt.
• Remittances (earnings) of immigrants in Ireland sent abroad.
Therefore:
 GDP is a better guide to the level of economic activity in a country whereas

GNP is a better guide to the standard of living in a country.
GNP @ current market prices – indirect tax + subsidies = GNP @ factor cost
Indirect tax
Is a tax on pending such as VAT.
Subsidy
Is a sum of money paid by the government to a producer in order to decrease costs of
production or a payment to exporters to allow them to sell goods more cheaply.
Eg.
Factor Cost
Is the cost of a factor of production producing a good/service (includes subsidies by excludes
taxes).
Gross National Product at Factor Cost
Is the value of the total goods and services produced in one year in an economy by Irish
owned factors of production (including subsidies and excluding taxes) before depreciation is
deducted. .
Depreciation
 Is the capital used up in production.
 It is the loss in value of capital goods (fixed assets in the prodution of goods and
services in the economy.
Net National Product at Factor Cost (National Income)
Is the total of all incomes earned by the permanent residents of a country whether earned in
that country or abroad after depreciation has been deducted.