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Gross National Income (GNI) – A reflection of the size and health of a country's economy

Gross Domestic Product (GDP), Gross National Product (GNP) and Gross National Income (GNI) have one thing in common that you need to remember: they all reflect the size and health of a country's economy.

An increase in any of these, when adjusted for inflation, is a sign that the economy is doing better than the previous year. If you see a capital G at the start of a three letter acronym, i.e., GDP, GNP or GNI, remember that the G stands for "Gross" and is a reflection of how a nation is doing:

"Gee my grocery (gross) store is doing well financially this year".

"Gee my grocery (gross) store is doing well financially this year".


Here are some further details about GDP, GNP and GNI:


GDP stands for Gross Domestic Product of a nation. There are two ways to calculate this: either calculation by spending (expenditure approach) or calculation by income approach. Either should give you the same answer.


GNP stands for Gross National Product of a nation. 
GNP = GDP + net income from abroad (includes dividends, interest and profit).
GNP = GDP + Income received from other countries.


GNI stands for Gross National Income of a nation.
GNI = GDP produced by nationals (citizens of the country in which they were born) whether or not they live in the country.
GNI = GDP + income received from other countries minus income flowing out of the country.

So, if a British-based company such as BP sends profits back to the UK, our GNI is enhanced, while profits flowing out of the country from a company such as Nissan to Japan will count towards Japans GNI and not the UK's.

Calculation by Spending (Expenditure Approach)

GDP = money spent by consumers + money spent by businesses in investments + money spent by government + net exports (export minus imports).

Which is

GDP = total sales of each company and each person in the country + investments made by companies buying shares + what a president or prime minister spends + things we buy from abroad - things other countries buy from us.

GDP = C + I + G + (X-M)
= consumption + investment + government + (exports - imports)

Calculating by Income Approach

GDP = wages labour + any interest + rent earned + any profits + any taxes to pay (indirect business taxes) + capital consumption allowance.

GDP = how much everyone earns from their jobs + money we earn from banks + rent + profits from businesses + taxes to government and local government + depreciation on equipment. 

GDP = W + I + R + P + IBT + CCA
= wages + interest + rent + profits + taxes + depreciation.

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