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There are 3 related measures of economic activity
>GDP Gross Domestic Product
> GNP Gross National Product
> NNP / Net National Product- National Income
Final goods include both consumer and capital goods.
There are 3 methods for calculating this value:
Various problems need to be avoided in each method if an accurate measure of GDP is to be achieved.
Ireland as an example is a net recipient of inward investment and consequently has a negative NFIA with the result that GNP is less than GDP
NNP = GNP - Depreciation
GDP @ market price = C+ I+G+X-M
The figures give an indication of how living standards in a particular country are
1) Changing over time
2) Compare to other countries
GNP per capita is also not a measure of competitiveness of an economy nor disparities in income distribution.
It is arrived by dividing the population of a country into it's GNP
In 2011 GDP was €159bn and GDP per head of capita was €35,455. When we remove NFIA and look at figures for GNP in 2011 this was 127bn and GNP per head of capita was €28,066
GDP overstates the income per capita in Ireland which is exacerbated by the low level of corporate tax rate in Ireland an the presence of MNC's transferring pricing which overstates the profits made in Ireland, value added.
GDP also does not take into account that different countries engage in the production of completely different production of goods and services or the quality of the goods produced.
It is also difficult to compare when all figures have to be bought to a standard currency to be measured and if exchange rates fail to reflect purchasing power parities
It comprises of 3 basic factors affecting living standards:
1 real GDP per capita (adjusted for PPP)
2 Life expectancy
3 Education - levels of literacy
In 2010 Ireland ranked 5th with a HDI of .891 Norway was the highest with a HDI of .938.
A Gini-coefficent of 0.00% would correspond to no inequality. One (100 on the percentile scale) reflects a maximum inequality (all of the nations income received by a single household)
Another measure is NEW Net Economic Welfare
It is an attempt to incorporate some of the non-monetary aspects in a measure of living standards such as pollution, congestion, leisure and quality of natural and social environment.