life / politics

Liveblogging: GNP/GDP Basics

Seeing as how GDP and GNP is a confusing statistical dust thrown in the eyes of people, it is an interesting thing to blog about economics right in my own classroom.

Salient Points of GNP

  • Market Value
  • Final Goods and Services
  • Products in a given year

Salient Points of GDP (Gross Domestic Product)

Essentially the definition is the same but domestic means within the country, produced by the residents of a country. These includes foreigners who reside in the country.

Filipino expatriates abroad contribute to the Net Factor Income.

Unrecorded Transactions

Any non-productive output is not included in the  calculation of the GDP. Examples of these are private-financial transactions such as giving money to relatives. CCTs are thus not part of the GDP calculation. This also includes commodities and services that are not socially good (i.e. drugs). Unrecorded transactions also include the underground economy. Which means that the GDP is an imperfect measurement of national growth but is widely adapted by UN countries.

Population Pressure

Every year it must increase since it must surpass the population rate which is about 2.1 percent. Our GDP in real terms has grown from 6.4 percent in the 1st Quarter of last year. 5.9 percent from 2Q of last year. If our population is increasing by 2.1 % therefore our GDP should increase by 6 percent in order to raise standards of living.

Nominal vs Real

Real is more reliable measurement. Example, a given nominal wage of 400 pesos. Inflation eats away real wages depending on the rate of inflation. If inflation increases by 50 percent next year, the real wage of worker is 200 pesos.

Base Line

The Aquino administration unfortunately picks up the habit of changing the definitions and base line to make the GDP statistics look good. According to the UN and World Bank.

Price Index

The Price Index is a comparison of prices from a base year to the year being measured. These products include rice, bread, vegetables and oil.

Estimating GDP

1. Expenditure Approach – GDP is determined by calculating the final figure of total spending on goods and services.

  • Household Consumption
  • Gross Private Domestic Investment
  • Gov’t exp on goods and services
  • Rest of the world expenditure:Net Export

2. Income Approach – GDP is determined by calculating the total market value of goods and services produced.

3. Product Approach – GDP is determined by calculating the total the income received by all producers in the country.



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