Gross National Product

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