Gross Domestic Product (GDP) is the market value of final goods and services produced domestically within the country during a period. GDP counts all final goods and services, regardless of the products" or workers" country of origin. Only production within the country is counted, the earnings of American's abroad are not. Financial transactions and income transfers are not included since they do not involve production. All of these factors are applied to determine the GDP during a specific time period, usually a year.
The components of GDP using the Expenditure Approach are:.
a) Personal consumption purchases - i.e. food, clothing, recreation, etc.
b) Gross private investment (which includes depreciation) - production or construction of capital goods that provide possible future service.
c) Government consumption and gross investment - expenditures on such items as office supplies, law enforcement, government facilities that are utilized.
d) Net exports - total exports minus total imports.
Gross National Product (GNP) is national income added with depreciation and indirect business taxes. National income is comprised of the sum of employee compensation, proprietors" income, rents, corporate profits, and interests. Put simply, national income is the income of Americans, regardless of whether that income was earned domestically or abroad. The income foreigners earn in the United States is excluded.
McDonald's, NIKE, General Electric are just a few examples of American companies that have American employees working abroad in other countries. The income of these individuals is all part of the GNP. GDP reflects "where the jobs are", while GNP reflects where the government can collect taxes.
I have chosen discuss the economies of South Korea and Mongolia. South Korea's GDP per capita was estimated to be $19,400 in 2002. The major components of South Korea's industry are electronics, automobile production, chemicals, shipbuilding, steel, textiles, clothing and footwear.