Country GDP (Gross Domestic Product) is one of the primary economic indicators for a nation. It is used to gauge the economic soundness of the country. Country GDP data is a measure of all the services and goods produced within a particular country over a period of time, generally one year. Economists evaluate the market value of goods and services to arrive at a number which is called as country GDP. Thus, country GDP reports reflect the per capita economic well being in a numeric form. Higher the per capita GDP, higher will be the economic soundness of the entire nation and higher will be the standard of living.
Methods to Calculate Country GDP
There are two approaches to calculating country GDP: the income approach and the expenditure method. The income approach adds up the per capita income over a specific period of time. It includes the gross compensation to employees, gross profits incurred by production units and taxes (after deducting subsidies). However, the expenditure method utilizes the total government spending, consumption, investment and net exports to calculate the GDP.
The formula to compute country GDP is
GDP = C + G + I + NX
C = consumer spending
G = sum of government spending
I = sum of businesses spending
NX = net exports (calculated as Exports - Imports)
What is Country GNP?
The Gross National Product or GNP considers the final goods and services produced by factors of production that are owned by a particular country's residents over a period of time. Although the GDP and GNP are very similar in nature, they differ on the concept of production in foreign-owned companies. Unlike the GDP, country GNP does not take into account the factors of production owned by foreign nationals in a particular country. However, it utilizes production of goods and services at an overseas unit owned by the particular country’s resident.
Although GDP and GNP are established economic indicators, they have some inherent drawbacks. Firstly, they do not account for black and gray markets that make up a sizeable proportion of the GDP in some countries. Secondly, they do not reflect economic disparity and provide an average per capita number. Owing to these problems, economists have suggested the use of more accurate economic indicators. But for now, the Country GDP and GNP are the most popular economic indices used to judge the economic well being of a nation.