three philosophical approaches, three measures of economic activity have emerged. Gross domestic product (GDP) is the total of all economic activity in a single country, usually for a single year (although the time period is identified when the statistic is presented). GDP is neutral with regard to the ownership of a particular asset. Thus the GDP of the United States includes the profits of foreign firms doing business in the United States even if those profits are sent back to their headquarters in another country ("Gross Domestic Product," 1999, p. 5).
Gross national product (GNP) is the total of all incomes earned by all residents of a nation. As with GDP, GNP is neutral with regard to where the assets of the residents are located. Thus the GNP of the United Kingdom includes profits for British owned companies and subsidiaries located in other countries (Joutz & Stekler, 1998, p. 1012).
Net national product (NNP) is GNP less depreciation (Joutz & Stekler, 1998, p. 1012). Neither GDP nor GNP takes into account the capital consumption required to produce the outputs they measure. When depreciation is factored into the equation, the net national product results. Net national product also is insensitive as to the ownership of assets in its calculations.
Using these measures, GNP is equal to GDP plus property income from foreign operations, and NNP is equal to GNP less capital consumption (Joutz & Stekler, 1998, p. 1012).
GDP is the most commonly used measure of economic activity because it takes into account domestic operations and does not include activity generated outside the country. However, nominal GDP taken in isolation offers only a raw piece of data which has little qualitative value. Trend analysis can help analysts determine whether GDP is increasing or decreasing, and at what rate. This offers more significant information (rather than just raw data), but fails to adjust for one of the most pervasive ec...