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.