This document defines and explains key macroeconomic concepts including GDP, GNP, per capita GDP, and net factor income. It also discusses limitations of GDP as a measure and factors that can cause errors and omissions in GDP calculations such as the black market economy. Additional topics covered include income distribution across populations, the relationship between population size and economic growth, and how external factors can positively or negatively impact an economy.

1. MAX LE BLANC &CHRISTIAN DODD
CA1 Macro
Economics
GDP, GNP, NI

2. CONTENTS
• GDP
• Real GDP
• GNP
• Per Capita GDP
• Net Factor Income
• Limitations of GDP
• Economics effects of Black market in Ireland
• Statistics
• References

3. GDP
• Gross Domestic Product (GDP) is the market value of all recognized final goods
and services produced within a country in a given period time, you can think of it
as the size of the economy. (Wikipedia)
• It does this by 4 factors of production ( Land, Labor, Capital, Enterprise) in a
time period, typically one year.
• Usually, GDP is expressed as a comparison to the previous year. For example,
if the year-to-year GDP is up to 3%, this is thought to mean that the economy
has grown by 3% over the last year. (www.Investopedia.com)

4. REAL GROSS DOMESTIC PRODUCT (REAL GDP)
•
It’s a macroeconomic measure of the value of economic output adjusted for price
charges (ie inflation). This adjustment transforms the money-value measure,
nominal GDP, into an index for quality of total output.
•
Relationship with nominal GDP. Real GDP is an example of the distinctive
between real vs. nominal values in economics. Nominal gross domestic product
as the market value of all final goods produced in a geographical region, usually
a country that market value depends on the qualities of goods and services
produced, and their respective prices.
•
Real GDP accounts for price changes that may occur due to inflation. If prices
change from one period to the next but actual output does not, nominal GDP
would also change even though output remained constant. To adjust for price
changes, real GDP is calculated using prices from a specific year, the base year.
This allows real GDP to accurately measure changes in output separate from
changes in prices

5. GROSS NATIONAL PRODUCT (GNP)
• Is the market value of all the products and services produced in
one year by labor and property supplied by the residents of a
country. Unlike GDP, which defines production based on the
geographical location of production based on ownership.
• GNP does not distinguish between qualitative improvements in
the state of the technical arts (eg increasing computer process
speeds), and qualitative increase in goods (eg number of
computers produced) and considers both to be forms of
“economic growth”.

6. GNP
• Basically GNP is the total value of all final goods and services
produced within a country 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. GNP measures the value of
goods and services that the country’s citizens produced regardless of
their location.
• GNP is ne measure of the economic condition of a country, under the
assumption that a higher quality of living, all others things being equal.
• In Ireland, GDP is typically 20% higher than GNP
• So GNP is a better measure of the economic wealth accruing to Irish
people

7. GDP PER CAPITA
• Per Capita is often used as average income, a measure of the wealth of the
population of a nation, particularly in comparison of other nations.
• Per Capita income, also known as income per person, is the mean income of
the people in an economic unit such as a country or city. It is calculated by
taking a measure of all sources of income in the aggregate (such as GDP or
GNP) and dividing it by the total population.
• High Per capita GDP is a indication of a high standard of living.
• Per capita GDP of Ireland $42,600 (2012)
• Per capita GDP of USA $50,700 (2012)
• Per capita of UK $37,500 (2012)
(www.cia.gov)

8. GDP PER CAPITA
• This is the measuring of the wealth of a country by the
population per person
• It is the most important effective way as it shows how
much each person makes in a country on average.

9. NET FACTOR INCOME
• Net Factor income is the difference between GDP and GNP.
• NFI is payments made into a country from citizens or businesses abroad and
also payments made to foreigners to provide a service domestically.
• NFI also takes into account the money being sent abroad by multinational
company’s.
• If the NFI is negative it means that there are more exports than imports.

10. LIMITATIONS OF GDP
• Inflation can cause a GDP to rise when in fact they have mot
sold more goods at all but that the price of that good has risen.
• GDP is when the population is so big that the GDP is very high
but the GDP per capita is much smaller.
• Longer days less holidays are an example of this, the US
average working day is longer and they have less holidays but
there GDP is much higher, that Ireland as we have shorter
working days and more holidays

11. ERRORS AND OMISSIONS
• There is a few ways to get errors and omissions
1. Errors in the calculations, a number put in a wrong which distorts the
overall figures.
2. The black economy is when people are working off the books and not
declaring there wages, this is a big problem in Italy and it is
estimated to be accounting for ¼ of the GDP of Italy.
3. The last is where no money is used such as barter usually in poor
countries but there also in Ireland and an example of this would be if
I painted someone’s house and cleaned all there windows and in
return they would cut my garden for the next few months and no
money was handed over but a deal was made.

12. INCOME DISTRIBUTION
“Income distribution is how a nations total GDP is distributed amongst its
population” Sullivan, artur: Steven M.Sheffrin (2003)
Economics: Principles in action. Pg 348
Poorest 20%
Fourth 20%
Third 20%
Second 20%
Richest 20%
Brazil
Hungary
0
100
150
In Brazil the richest is 20% 50 owns 67% of the wealth and the poorest
and
20% and owns 2.1% of it

13. POPULATION SIZE
• Population is very important to a economy as the work force is
greater in a large size for example China with a population of 1
billion, they can make and export more products than a
population such as Ireland that has 5 million.
• The greater the population in a developing country the bigger
the economy is, we can see this in the BRIC countries which
are ; Brazil Russia India and China.

14. EXTERNALITIES
• Externalities can effect a economy and could be good or bad.
• Examples of externalities are:
• Earthquakes, Weather, Good Education and Pollution.
• A externality for California is the good weather and it brings
tourists. San Fransisco has earthquakes which would draw
tourists away.
• Ireland good externalities would be good education
• A bad externality for Ireland would be the bad weather.

15. REFERENCES
• http://www.investopedia.com/ask/answers/199.asp
• http://en.wikipedia.org/wiki/Gross_domestic_product
• http://en.wikipedia.org/wiki/Gross_national_product
• https://www.cia.gov/library/publications/the-worldfactbook/rankorder/2001rank.html
• https://www.cia.gov/library/publications/the-worldfactbook/rankorder/2092rank.html