gross national product

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gross national product (GNP), in economics, a quantitative measure of a nation's total economic activity, generally assessed yearly or quarterly. In estimating the GNP, only the final value of a product is counted (e.g., automobiles, but not the steel that they contain). The three major components of GNP are consumer purchases, private investment (including overseas investment but excluding foreign investment in a nation's economy), and government spending. The GNP is reported quarterly in the United States and was used as a barometer of the nation's economic health from the 1930s, but in 1991 the government switched to emphasizing the gross domestic product (GDP), which is similar but covers only goods and services produced inside a nation's borders. The GDP, which also is reported quarterly, is regarded as a better indicator of the performance of a country's economy and is used as such by most industrialized nations. The U.S. government continues to report the GNP, but about a month after the GDP. Despite the fact that GNP and GDP do not measure the service and government sectors as well as they do manufacturing, and also do not allow for inflation, overall value of production, and other factors, such as the value of the underground economy, they are nevertheless significant measurements of economic health. In the United States, the economy has been considered to be in recession if there are two consecutive quarters of decrease in GNP or GDP. In 1995 the International Bank for Reconstruction and Development (World Bank) created a new system for measuring national wealth, based on the value of natural and mineral resources.

See L. C. Thurow and R. L. Heilbroner, Economics Explained (1987); J. Craven, Introduction to Economics (1984); D. Coyle, G.D.P.: A Brief but Affectionate History (2014).

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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

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gross national product (GNP) Total market value of all goods and services produced by a country annually, plus net income from abroad. GNP is a universal indicator of economic performance, and provides an assessment of different economic sectors. GNP is the sum of four types of spending: private consumption (goods and services bought by the community), government expenditure, balance of trade, and business investment. See also gross domestic product (GDP)

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Gross National Product (GNP) An unduplicated measure of the total flow of output in any economy during a specified time-period. Unduplicated means that the measure excludes intermediate goods and services that are used as inputs in the production of further goods and services—such as the use of flour to make bread for sale. The aim is to measure final products—the consumer goods and services which constitute the ultimate aim of all productive work. It is accepted by economists that GNP excludes large amounts of consumption work and other types of work. See also INFORMAL ECONOMY.

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gross na·tion·al prod·uct (abbr.: GNP) • n. the total value of goods produced and services provided by a country during one year, equal to the gross domestic product plus the net income from foreign investments.