Examine the composition of national income (or national output); Study the concepts of Gross National Product (GNP) and Gross Domestic Product (GDP), and differentiate between the two measures; Look at the two approaches to measuring GDP and GNP; Learn the differences between real and nominal output: and Learn what economists use to determine whether the national economy is growing or not.

1. Vincent Dignos
BSE – Social Studies
2016
MEASURING
NATIONAL
OUTPUT

2. In this module, you will:
1. Examine the composition of national income (or national
output);
2. Study the concepts of Gross National Product (GNP) and
Gross Domestic Product (GDP), and differentiate between
the two measures;
3. Look at the two approaches to measuring GDP and GNP;
4. Learn the differences between real and nominal output:
and
5. Learn what economists use to determine whether the
national economy is growing or not.

3. Different sectors of the economy:
1. Households
2. Firms
3. Government
4. Trade sectors

4. GROSS NATIONAL PRODUCT
- The market value of the final goods and
services produced in a given year.
- The economy produces all sorts of goo
d and services every year. All these co
mmodities are accounted for the count
ry’s GNP.

5. GROSS DOMESTIC PRODUCT
- Gross Domestic Product (GDP) mea
sures the value of goods and service
s produced by country’s borders.

6. APPROACHES TO MEASURING NA
TIONAL OUTPUT
1. Expenditure Approach
2. Income Approach
3. Industrial Origin

7. The Expenditure Approach
GNP = C + I + G + (X – M) + Net Factor Income
from Abroad + Statistical Discrepancy
C= Consumption expenditures
I = Investment expenditures
G= Government expenditures
(X-M) = Net exports

8. The Income Approach
GNP = PI + GI + CI + IT – S +
D
PI = Personal Income
a. salaries and wages
b. profits and dividends
c. rents
d. interest
GI = Government Income
CI = Corporate Income
IT = Indirect Taxes
S = Subsidies
D = Depreciation

9. GNP by INDUSTRIAL ORIGIN
Agriculture, Fisheries and Forestry +
Industry + Services = GDP by Industrial
Origin GDP + NFIA = GNP

10. CURRENT vs CONSTANT OUTPUT
How do we know that GNP is rising?
When GNP rises, it may be because of two reason:
- quantities are rising
- prices are rising

11. CURRENT vs CONSTANT OUTPUT
Current GNP – is GNP without adj
usting for changes in prices as they r
ise every year.
Real GNP – refers to GNP while ke
eping prices constant.

12. CURRENT vs CONSTANT OUTPUT
How is this done?
How do we make prices constant whe
n they rise every year?

13. CURRENT vs CONSTANT OUTPUT
Year Current Price Quantity Value
(price X quantity)
2000 P50 10,000 P500,000
2001 P51 10,000 P510,000
2002 P52 10,000 P520,000
1.1 Price and Quantity of bibingka production (In current prices)
1.2 Value of production keeping price constant (using base year)
Year Current Price Quantity Value
(price X quantity)
2000 P50 10,000 P500,000
2001 P50 10,000 P500,000
2002 P50 10,000 P500,000

14. CURRENT vs CONSTANT OUTPUT
Price Index =
𝑃𝑟𝑖𝑐𝑒 𝑖𝑛 𝑡ℎ𝑒 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑌𝑒𝑎𝑟
𝑃𝑟𝑖𝑐𝑒 𝑖𝑛 𝑡ℎ𝑒 𝐵𝑎𝑠𝑒 𝑌𝑒𝑎𝑟
× 100
Year Computation Price Index
2000 𝑃50
𝑃50
× 100 100
2001 𝑃51
𝑃50
× 100 102
2002 𝑃52
𝑃50
× 100 104

15. CURRENT vs CONSTANT OUTPUT
- The example clearly show the difference bet
ween nominal (or current) vale and real (c
onstant) value.
- If real GNP rises, then we know that the qua
ntities of commodities produced in a year h
ave risen.

16. CURRENT vs CONSTANT OUTPUT
Year GNP in
Current Prices
GNP in
Constant Prices
GNP
Growth Rate
1985 551,428 551,428 100.00
1990 1,071,433 716,929 149.45
1995 1,958,555 824,525 237.54
2000 3,566,059 1,037,856 343.60

17. GROWTH RATE
GNP Growth rate =
𝑮𝑵𝑷 𝒊𝒏 𝒂 𝒈𝒊𝒗𝒆𝒏 𝒚𝒆𝒂𝒓 −𝑮𝑵𝑷 𝒊𝒏 𝒕𝒉𝒆 𝒑𝒓𝒆𝒗𝒊𝒐𝒖𝒔 𝒚𝒆𝒂𝒓
𝑮𝑵𝑷 𝒊𝒏 𝑷𝒓𝒆𝒗𝒊𝒐𝒖𝒔 𝒀𝒆𝒂𝒓
x 100
Year
GNP in
Current Prices
GNP in 1985
Constant Prices
GNP Growth Rate
Nominal Real
2000 3,566,059 1,037,856 - -
2001 3,918,679 1,073,066 9.89% 3.39%
2002 4,290,199 1,121,039 9.48% 4.47%

18. GROWTH RATE
GNP Growth rate =
𝑮𝑵𝑷 𝟐𝟎𝟎𝟐−𝑮𝑵𝑷 𝟐𝟎𝟎𝟏
𝑮𝑵𝑷 𝟐𝟎𝟎𝟏
x 100
=
𝟒,𝟐𝟗𝟎,𝟏𝟗𝟗−𝟑,𝟗𝟏𝟖,𝟔𝟕𝟗
𝟑,𝟗𝟏𝟖,𝟔𝟕𝟗
x 100
GNP Growth rate = 𝟗. 𝟒𝟖% (𝑵𝒐𝒎𝒊𝒏𝒂𝒍)
=
𝟏,𝟏𝟐𝟏,𝟎𝟑𝟗−𝟏,𝟎𝟕𝟑,𝟎𝟔𝟔
𝟏,𝟎𝟕𝟑,𝟎𝟔𝟔
x 100
GNP Growth rate = 𝟒. 𝟒𝟕% (𝑹𝒆𝒂𝒍)

19. END