Transcript Measuring Economies

Measuring Economies
GNP, GDP
And
“per capita”
Measuring the Size of the Economy
GNP & GDP measure the size of the Economy.
GNP or “Gross National Product” is the total value
of all economic activities done by all the people
and companies of a country.
Problem: It counts activities done in other
countries by a company based in the home
country.
This misrepresents the amount of economic
activity actually done in the country
So they came up with a new measure…
GDP or Gross Domestic Product
Which is the total value of all economic activities
within a country’s borders.
Problem: While these are good measures of the
size of the economy it doesn’t say much about the
health of the economy.
A country with a large population has high GNP
and GDP even if its people are poor.
“per capita”
“per capita” is Latin for “per head” or “per person”
To get an idea of the health of an economy we need
to know how much activity there is “per capita”
To get the “per capita” measure divide the total by
the population.
Thus there is GNP “per capita”
and
GDP “per capita”
A healthy economy has a high “GDP per capita”
Income “per capita”
Income “per capita” is the amount of money
the average person makes.
It is a good measure of how rich or poor the
people in the country are.