Question

3- Describe what are the components of gross national product and national income.

Answer 1

The gross national product (GNP) of a country is a calculation of the value of its goods and services output over a given period of time, usually one year. When expressed in constant dollars, comparisons of the GNP from year to year or quarter to quarter reflect shifts in the total performance of a nation and the course of its economy. Economic policy makers typically look at the size and growth of the GNP as an indicator of the health of the country's economy. In a sense it's the most important single measure of how an economy works. Four components of GNP expenditures: consumption, investment, government purchases, and net exports.

The system of spending accounts for the sources of monetary demand for goods and services. The largest portion, consumption, involves the value of all the products and services that customers have purchased during the year. The investment group includes construction and machinery manufacturing, as well as net inventory accumulation. Financial investments, which often include transfer payments rather than capital goods output, are not counted. Government purchases include only expenditures for goods and services, not transfer payments such as Social Security. Net exports include the value of all goods produced in the United States but sold abroad, minus the value of goods produced abroad and imported into the United States.

The components or constituents of national income are: 1. Gross Domestic Product (GDP) 2. GDP at Factor Cost 3. Net Domestic Product (NDP) 4. Nominal and Real GDP 5. GDP Deflator 6. Gross National Product (GNP)