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Gross National Product and Per Capita Income

A country’s Gross National Product, or GNP, is a quantifiable method that measures national economic output and production. It can be used to gauge a country’s economic health and size and it is usually measured on a yearly basis in units of dollars. Several components are used to calculate it per this formula: GDP= C + I + G + (X-M), where “C stands for consumption done at private levels in that particular country whose GDP is being measured.

I is investment made by various entities, for example- families and business establishments. G stands for expenditure made by governmental entities, X stands for exports and M stands for imports” (Economy Watch, 2009). Gross National Product is derived from a country’s Gross Domestic Product and can be stated as “the broadest measure of national income, measures total value added from domestic and foreign sources claimed by residents. GNP comprises gross domestic product (GDP) plus net receipts of primary income from non-resident (i.

e. foreign) sources” (CSUN, 2009). Even though the GDP formula includes consumption (C), aggregate production in Third World countries may be understated because substantial economic production may be consumed directly. These Third World countries, also known as developing countries, tend to

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have rudimentary, non-complex governments and antiquated and unstable economies that make accurate GNP measurements difficult with a typical bias towards understatement.

Per capita income (PCI) is another widely used measure of individuals’ wealth within a country. It is merely an average, so it is usually used to compare the wealth and economic health of individuals versus individuals in other countries. Highly developed, productive countries like the United States have much greater PCI than Third World countries like Haiti and Ethiopia.

Within these poor, developing countries, income distribution is skewed heavily towards small numbers of wealthy people and the vast majority of the population lives in abject poverty. Therefore, despite the industrial revolution, “about one billion people have not shared significantly in world economic growth” (Delong, 2009). References CSUN. (2009). Introduction to Third World. csun. edu. Delong, J. B. (2009). The World’s Income Distribution: Turning a Corner? berkeley. edu. Economy Watch. (2009). GDP. economywatch. com.

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