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Measuring Country's Economy: Gross Domestic Product vs. Gross National Product

8 September 2022
Measuring Countrys Economy Gross Domestic Product vs. Gross National Product

These days, it seems like every other headline is about the state of the economy not just exclusively in the Philippines but also in other countries in the world.

 

Supply chain disruptions caused by the Covid-19 lockdowns, wars in Russia and Ukraine and Israel and Gaza, as well as the rising tensions between China and Taiwan, and a host of other conflicts have all contributed to this state of affairs. The macroeconomic problems of many nations, particularly developing ones, are being severely impacted by the worldwide political and social repercussions of these issues.

 

In conducting an economic analysis of a country, it is important to consider its Gross Domestic Product or GDP and the Gross National Product or GNP. Let's take a look at what these two are all about as well as their differences from each other.

 

Difference Between GDP vs GNP

The Gross National Product (GNP) and the Gross Domestic Product (GDP) are two of the most widely-used indicators of a country's economic health. Both measures the sum of all money exchanged for all products and services produced over a certain time frame. They both involve calculations, although their methods somewhat vary.

 

Let's compare and discover the differences between the two below:

 

1. Defining the terms

A. GDP

The Gross Domestic Product (GDP) of a country is a yearly forecast of the market value of all final commodities and services produced and consumed inside its boundaries, by both its own population and its foreign residents.

 

It's the standard by which all other economic indicators are judged, therefore it's a good barometer of a country's economic well-being and size.

 

GDP may also be divided in two because of the effects of inflation--namely, real GDP and nominal GDP.

 

A country's real GDP can be determined when it has been adjusted for inflation. Two or more years' worth of GDP may be compared using this metric. On the other hand, nominal GDP is often larger than real GDP since it does not take inflation into account. Since inflation is often not a major influence when comparing GDP across quarters in the same year, nominal GDP is utilized.

 

To simply put it, an economy's Gross Domestic Product (GDP) is the monetary worth of all goods and services produced within its borders.

 

B. GNP

The term "Gross National Product" (GNP) refers to a yearly estimate of the total monetary worth of all products and services generated by the country's population regardless if they are within the nation's border or through overseas investments.

 

In layman's terms, an economy's Gross National Product (GNP) is the monetary worth of all goods and services produced within its borders.

 

2. Areas in which they are used

A. GDP

GDP measures the strength of a country’s local economy and is commonly used in business and economic forecasting.

 

In addition to being a crucial factor in determining where and how much to invest, GDP may be used to assess the relative success of two or more economies. It's also useful for informing policymaking by governments as they seek to spur economic growth in their own areas.

 

B. GNP

While the primary purpose of using GNP in these contexts is to assess the standard of living of a nation's citizens, it is also widely used in business and economic forecasts.

 

3. How they are calculated and measured

A. GDP

Public consumption, business capital expenditures, government expenditures, and net exports are the four key economic components that go into determining a country's GDP. Therefore, the formula for calculating GDP is:

 

GDP = Consumption + Investment + (Government Spending) + (Exports − Imports)

 

According to GDP's breakdown, it takes more than a steady stream of output for an economy to be considered "healthy."

 

As it happens, the ability of the people to spend is crucial to maintaining economic activity. Because of this, a nation with a high GDP should not only be highly productive but also provide its citizens with a high quality of life and a comfortable level of living.

 

In addition to this, the GDP per capita is another key indicator utilized by economists and policymakers.

 

By dividing a country's total gross domestic product (GDP) by the population, a financial indicator known as GDP per capita may be determined. An individual's "year income," or GDP Per Capita, is calculated as a fraction of a country's overall market value, or GDP. As a result, rising GDP is necessary to keep up with the expanding population and ensure that everyone has access to a rising standard of life. The pace of expansion or contraction of the GDP is indicative of its relative worth.

 

The Philippine System of National Accounts (PNSA), which falls under the purview of the Philippine Statistics Authority (PSA), is responsible for measuring GDP on a quarterly and yearly basis in the Philippines.

 

B. GNP

Total national product (GNP) is calculated by starting with GDP and adding in the resident's monetary value from investments made outside of the territory, minus the revenue generated by foreign residents from investments made within the territory. Therefore, the formula for calculating GNP is:

 

GNP = GDP + NR (Net income inflow from assets abroad or Net Income Receipts) - NP (Net payment outflow to foreign assets)

 

Gross National Income (GNI) is the standard phrase for an economic indicator that is roughly equivalent to GNP in the Philippines. As a matter of fact, the World Bank and the Human Development Index (HDI) are two of the many organizations that utilize GNI in place of GDP.

 

Lumina Homes, the Filipinos' Partner in Real Estate Growth

Household real estate investments such as single-family homes and multi-family dwellings such as townhouses, duplexes, and single firewall house and lot in the Philippines also go into GDP and GNP calculations.

 

In actuality, it turns out that the PSA report for the first three months of 2022 indicated that the service sector of the Philippine economy had continued to grow by 8.6 percent, with the subsector of the real sector and ownership of homes accounting for 7.9 percent of the sector's contribution.

 

Lumina Homes is a part of this economic growth rate with its over 50 development sites across the country that are all located in key cities and municipalities. We have affordable house and lot for sale in the provinces of Camarines Norte, Quezon, Albay, Laguna, Sorsogon, Batangas, Iloilo, Cavite, Isabela, Capiz, Cagayan, Cebu, La Union, Pangasinan, Negros Occidental, Tarlac, Agusan del Norte, Nueva Ecija, Zamboanga del Sur, Zambales, Bukidnon, Bataan, Misamis Occidental, Pampanga, Davao del Norte, Bulacan, Davao del Sur, Rizal, and South Cotabato.

 

This is aside from the fact that we also offer flexible payment schemes and a better homebuying journey to every Filipino family through bank financing and in-house financing while assisting our homebuyers in processing their chosen financing method.

 

Start your home investment and enjoy our functional amenities as and take advantage of our sustainable communities in securing your future through Lumina Homes!

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