Gross Domestic Product (GDP):
Gross domestic product (GDP) is the value of the total final output produced inside a country, during a given year. GDP, like all measures of national income, is a flow figure accruing over the period of one year. GDP might be calculated at market prices (includes sales tax paid by consumer as part of the final price) or at factor cost (excludes sales tax). If there is no sales tax, the two measures collapse to the same thing.
Net Domestic product (NDP):
Net domestic product (NDP) is obtained by subtracting depreciation from GDP. Depreciation is the reduction in the value of a capital good due to the wear and tear caused during production.
Gross National Product (GNP):
Gross national product (GNP) is the value, at current market prices, of all final goods and services produced during a year by the factors owned by the citizens of a country. Thus the income earned by Pakistani citizens working in the US would be included in Pakistan’s GNP but excluded from Pakistan’s GDP. Conversely, the income earned by a US citizen (individual or corporate) in Pakistan would be included in Pakistan’s GDP but excluded from Pakistan’s GNP. Generally, GNP = GDP + net factor income from abroad.
Mathematically, national income is net national product (NNP). It is GNP adjusted for depreciation. In words, it is the net output of commodities and services flowing during the year from the country’s production system in the hands of ultimate consumers.
Different Ways Of Measuring GDP:
There are three equivalent ways of measuring GDP:
- The product or value added method which sums the value added by all the productive entities in the economy;
- The expenditure method which sums up the value of all the “final goods” transactions taking place in the economy;
- The factor income method which sums up all the incomes earned by all the factors of production in the economy (rent for land, wages for labor, interest for capital, and equity returns for entrepreneurship).
