# Gross national product

Also known as: E.G

The gross national product reflects the sum of all goods and services that are produced in the respective national currency of an economy within a year.

## Definition / explanation

With the help of Factors of production Capital, labor, and land produce goods and services owned by residents.

The gross national product, also known as gross national income, measures the value of all products that are owned by residents, i.e. those economic subjects who are resident in the country or are citizens. The income from employment and property ownership (e.g. interest) are also used for the calculation. Therefore, the gross national income is the central income indicator of every economy.

The gross national product is the value of all goods and services used by residents within a certain period (usually one year).

## Nominal gross national product

The nominal gross national product is calculated from the prices of the observed period for goods and services. However, there is no consideration of inflationary (or deflationary) developments, increases or decreases in value.

Inflation usually means price increases, which increases the value of gross national income. An example serves to understand:

In 2003, a bread roll costs EUR 0.20 and a bar of chocolate EUR 0.89. We buy 3 rolls and a bar of chocolate each.
The gross national product is calculated as follows: 3 * 0.20 EUR + 1 * 0.89 EUR = 1.49 EUR

In 2010 a bread roll costs EUR 0.30 and a bar of chocolate EUR 1.00. The gross national income for 2010 would be 1.90 euros.

## Real gross national product

Since the performance of residents at home and abroad is taken into account here, this key figure reflects the economic performance of economic agents more precisely.

The prices of a base year are used for the calculation. Price increases caused by inflation are therefore not taken into account. Nevertheless, the rate of increase in prices since the base year must be taken into account.

If one takes the year 2003 from the above example as the base year, then only this would be used for the calculation. The number of goods consumed remains the same, so the gross national product did not grow in 2010 either.

## Calculation of the gross national product

All incomes earned by residents are used for the calculation, regardless of whether they were earned domestically or abroad (so-called resident concept).

Das ist der zentrale Unterschied zum gross domestic product, welches Leistungen der In- und Ausländer innerhalb des Inlands (sogenanntes Inlandskonzept) betrachtet.

All earned income and property income that flowed abroad must be deducted from the gross national product. The period of one year is usually used for the calculation.

## Summary

• Gross National Product (Gross National Income) = Value of all incomes of residents in a certain period of time
• nominal gross national product = quantity times price of the current year
• real gross national product = quantity multiplied by the price of the base year
• Gross national product refers to all residents, regardless of whether they are resident abroad or in Germany
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