Gross national product is the most important macroeconomic indicator

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:44

While listening to politicians' speeches or reading economic articles on the causes of our country's endless problems, we very often hear about such an indicator as the gross national product. This, economists say, is an indicator of the state of the country's economy, which is only slightly inferior in accuracy to the gross domestic product (GDP). Interestingly, even 20-25 years ago, the gross national product (GNP) was considered the most important indicator that reflects what phase of the cycle a given economy is in, so it definitely won’t hurt you to get to know it better.

Gross national product is the monetary expression of the total amount of output produced during the year in the territory of a given country. Unlike the gross domestic product, it does not take into account whether it was issued by residents or non-residents. Gross national product -This is an indicator that includes not only goods produced, but also services rendered and work performed. At the same time, it is important to understand that only final products are taken into account, the value of which is expressed in current market prices. This is done so that there is no recalculation, as well as confusion.

Gross national product is a macroeconomic indicator that is directly affected by the country's currency exchange rate. And there is a perfectly logical explanation for this. Just imagine that the GNP of the state in question has increased. What does this mean? First, it is likely that industrial production has increased in the state, which is associated either with an increase in its efficiency or with its expansion. Second, most likely, the volume of foreign investment has also increased. Thirdly, the export indicator has become higher. All of these factors lead to an increase in demand for the national currency. But how can a “good”, the demand for which is constantly growing, be cheap? The national currency becomes stronger. But what happens if the gross national product continues to grow steadily for several years?

It turns out that in this case we will encounter such a thing as inflation. In order to prevent the depreciation of the national currency, the state will have to raise interest rates, which will reduce the amount of money in circulation.

It is also important to understand that VP can be real and nominal. The real is calculated in the prices of the period,which was chosen as the base, which allows you to get a truly realistic picture of whether the welfare of the country's population is really growing, or money is simply depreciating.

Gross national product can be calculated using various methods. According to economists, this can be done in three main ways. First, you can add up all the income for the year. The sum of wages, interest, rent payments, depreciation and indirect taxes is taken into account in the method of calculating GNP by income. Secondly, you can calculate how much will be needed to purchase all the products released during the year. Third, GNP can be calculated from the value added produced. Some economists believe that the last option is the most reliable one.