1. GDP and GNP are measures of the total value of goods and services produced in an economy. GDP measures production within a country, while GNP includes income produced by citizens of that country from abroad. 2. There are three approaches to calculating GDP: expenditure, income, and output. The expenditure approach sums consumer spending, investment, government spending, and net exports. The income approach sums wages, rents, profits, and taxes. 3. Real GDP adjusts for inflation to measure the output in constant dollar terms, while nominal GDP does not adjust for inflation and can increase due to higher output or prices.

1. GNP and GDP
Group 6
Presented by:
Arvin Dominic Dela Cruz
Jerrie Lloyd Peñales
John Lorence Peñales
Joshua Bajana
Economics with land Reform and Taxation

2. Gross Domestic Product (GDP)
•The total value of output of goods
and services produced within an
economy in a given period of time
•3 approaches to measure GDP:
 Expenditure approach
 Income approach
Output/ Product approach

3. Calculating GDP: The Expenditure Approach
•The Expenditure approach totals annual
expenditures on four categories of final
goods or services:
1.Consumer goods and services
- Durable goods
- Non-durable goods
2.Business goods and services
3.Government goods and services
4.Net exports or imports of goods or services

4. Formula of GDP using Expenditure approach
•Expenditures = C + I + G + (X – M)
Consumption (C)
Investment (I)
Government spending (G)
Net Exports (X-M)
Exports (X)
Imports (M)

5. Calculating GDP: The Income Approach
•The income approach calculates GDP by adding
up all the incomes in the economy.
•Formula for GDP (Income approach)
GDP = R + I + P + SA + W
R : rents
I : interests
P : profits
SA : statistical adj.
W : wages

6. What are excluded in GDP?
1.Intermediate goods
2.Transfer payments
3.Home Production
4.Pollution/environmental
damage
5.Illegal Goods

7. What does GDP indicate?
•GDP is important because it gives an
indication of how successfully society
is addressing the scarcity problem.
•A larger gross domestic product, there
are more goods and services that can
be used to satisfy unlimited wants and
needs.

8. Nominal and Real GDP:
•Nominal GDP is GDP measured in current prices. It
does not account for price level increases fro
•Nominal GDP is GDP which has NOT been
adjusted for Inflation year to year.
•Real GDP is GDP expressed in constant, or
unchanging, peso / dollars.
•Real GDP is GDP which has been adjusted for
Inflation

9. Formula of Nominal GDP
•Nominal GDP = (P x Q)
•Where:
Output (q)
Prices (p)
•Nominal GDP can grow because of three
reasons:
1.Output (q) rises and prices remain
unchanged
2.Prices (p) rise and output remains
unchanged
3.Both output and prices rise

10. Formula of Real GDP
•The formula for real GDP is nominal GDP
divided by the deflator, or
•R = N/D
•For example, if prices rose 2.5% since the
base year, the deflator is 1.025. If the
nominal GDP were 10 million, the real GDP
would be 976,000 or 10,000,000/1.025 =
976,000

11. GDP deflator
•Reflects the price of all goods and
services produced.
•Compares the price of currently
produced goods and services to the
price of the same goods and services in
the base year.
•GDP deflator = Nominal GDP
Real GDP
X 100%

12. Gross National Product (GNP)
•The total value of final goods and services
produced during a given period by the citizens
of a country.
•GNP is calculated by adding the value of
expenditure on final goods and services
produced.
•GNP = GDP + Net factor income from abroad
(difference between income earned in foreign
countries by residents of a country and income
earned by foreign nationals domestically).

13. GNP is one measure of national income, but a
more precise measure of national income is
GNP adjusted for following:
1.Depreciation of capital results in a loss of
income to capital owners, so the amount
of depreciation is subtracted from GNP.
2.Indirect business taxes reduce income
to businesses, so the amount of these
taxes is subtracted from GNP.

14. What does GNP indicate?
•GNP helps to measure the contribution of
residents of a country to the flow of goods
and services within and outside the
national territory.
What are excluded in GNP?
•Similar to that of GDP (household work and
illegal goods/services, etc.)

15. Thank You for Listening!
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