Methods of measuring GNP

GNP has two sides of expenditure and revenue. There are three different approaches to measuring GDP.

The first means look at GDP as the sum of all costs required to buy in the market the entire volume of production. This is - an approach to the definition of GDP by expenditure. [4, p.135]. Another approach is to look at the GDP in terms of income received or generated in the production of GDP. This is - an approach to the definition of GNP for income, or income.

A deeper analysis of these two approaches can reveal the essence, to which they both come down: GDP can be defined either by adding up all the costs for the purchase of the total produced in the year of production, or by the addition of income derived from the production of the total output of the year.

The calculation of GNP expenditure

GNP = C + I + G + X,

where:

C -personal consumption expenditures of households on durable consumer goods, goods for current consumption, and consumer spending on services.

I – gross private domestic investment, or "investment spending." They include three components: 1) the purchase of entrepreneurs machinery, equipment and tools, 2) all construction (commercial and residential construction), 3) investments in stocks.

G - government procurement, which include public consumption and public investment.

X – net exports. It represents the difference between income from exports and expenditure on imports of the country and meets the trade balance.