Cambridge International as and a level Economics Ebook

1
Explain why economic growth tends to increase car 
ownership.
2
Discuss whether economic growth always causes 
increased pollution.
224
Cambridge International A Level Economics

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However, given the relative size of the outputs of the two 
countries, the Russian economy grew by only 1.2% whereas 
Turkey’s grew by 4%.
Gross domestic product, gross 
national product and gross 
national income
Th
e most widely used measure of national income is 
known as gross domestic product (GDP). Gross means 
total, domestic refers to the home economy and product 
means output. So, for example, Pakistan’s GDP is a 
measure of the total output by the factors of production 
based in Pakistan. GDP is calculated by adding up 
consumers’ spending, government spending on goods 
and services, total investment, changes in stocks and the 
diff erence between exports and imports.
From GDP, a number of other measures of national 
income can be found. GDP plus net property income from 
abroad gives 
gross national income (GNI)
. Th
is used to be 
referred to as gross national product (GNP). Net property 
income from abroad is the income that the country’s 
residents earn on their physical assets (such as factories 
and leisure parks) owned abroad and foreign fi nancial 
assets (such as shares and bank loans) minus the returns 
on assets held in the country but owned by foreigners. 
So GNI gives a measure of the income of a country’s 
residents.
Gross national income (GNI): 
the total output produced 
by a country’s citizens wherever they produce it.
KEY TERM
The ways of measuring GDP
Th
ere are three ways of calculating GDP. Th
ese are 
the output, income and expenditure methods. Th
ey 
should give the same total because they all measure 
the fl ow of income produced in an economy. So the 
value of output is equal to the incomes that it generates, 
meaning wages, rent, profi t and interest. If it is assumed 
that all incomes are spent, expenditure will, by 
defi nition, equal income.