Issue 4, Spring 1992

William A. McEachern, Editor

Gross Domestic Product

As you probably know, after 50 years of reporting the gross national product, (GNP) as the broadest measure of economic activity, the federal government last December began reporting the gross domestic product (GDP) instead. Whereas GNP measure the value of output produced with resources supplied by U.S. residents and firms, regardless of the location of these resources, GDP measure the value of output produced with resources located in the United States, regardless of who owns these resources. Thus, GDP excludes overseas profits earned by U.S. firms, but includes profits earned in the United States by foreign firms.

The quantitative difference between GNP and GDP is relatively small (typically less than one percent) for a country such as the United States, first because such flows are relatively minor and second because these flows tend to offset one another. For example, GNP in 1990 was $5465.1 billion. To get to GDP, subtract from GNP $137.4 billion in factor income receipts from foreigners and add $95.7 billion in factor income payments to foreigners, yielding a GDP that year of $5423.4. Differences between GNP and GDP are more important for countries such as Egypt and Turkey, where many citizens work abroad.

More information about the conversion from GNP to GDP is available in the August 1991 and October 1991 issues of the Survey of Current Business. The Bureau of Economic Analysis is in the process of working out additional details for the national income accounts. I have been told by that office that a report will go to the printer in April.

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