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Gross national income (GNI) measures a nation’s income, including foreign investments, and can provide important information about economic health. Adjustments, such as purchasing power parity, can be made to allow for accurate comparisons between countries. GNI accounts for a nation’s outputs more effectively than GDP, and archive data should be analyzed carefully.
Gross national income (GNI) is a measure of the income produced by a nation. It is closely related to gross domestic product (GDP) and includes many of the same numbers. Economic organizations regularly produce rankings of nations by GNI, with various adjustments to contextualize the numbers they report, and this information is generally publicly available. This, among other measures, can provide important information about economic health.
To determine a nation’s GNI, economists start by looking at the value of the goods and services produced in the country, as if they were measuring GDP. They also examine income from other sources, such as interest and dividends produced through overseas investments. All of this information can be added together to determine how much wealth the nation has generated in a given period of time, usually a year. Decreases can be indicative of declining economic activity or rising public debt.
One problem with GNI numbers is that looking at them in an independent context may not provide very valuable information. For this reason, some charts adjust to Purchasing Power Parity (PPP). They analyze the price paid for common goods and services across nations and use this to normalize the units used so that accurate comparisons between countries can be made. If a hamburger, for example, costs $3.75 in one country but $7 in another, those nations need to be adjusted for purchasing power parity to show that a dollar goes a long way in a nation.
GNI calculations take into account a nation’s outputs more effectively than GDP. Measures that only look at the value of goods and services produced may miss some important factors. If a nation has a lot of foreign investment, for example, it can generate income in the country, but that money goes back to the parent companies. GNI measurements account for this, while GDP does not. This explains why rankings of nations by GDP and GNI often look different.
Archive data can be found in financial publications and other records. When analyzing old information, it is important to pay attention to whether it has been adjusted at the time, as this can skew the numbers. People comparing changes in GNI need to consider factors such as inflation that can change the meaning of the information. Adjustments such as PPP changes can also create problems unless people are aware that changes have been made to the numbers.
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