Gross National Income

Definition

Gross National Income (GNI) is the total value of all goods and services produced by a country's residents and businesses, regardless of their location. It is a measure of a country's economic output and well-being, often used to assess its level of development and compare it to other nations.

5 Must Know Facts For Your Next Test

1. GNI includes the income of a country's citizens and businesses, regardless of their location, whereas GDP only includes the value of goods and services produced within the country's borders.
2. GNI is often used to classify countries into different levels of economic development, such as high-income, middle-income, and low-income countries.
3. GNI per capita is a key indicator of a country's standard of living and is used by organizations like the World Bank to determine eligibility for development assistance.
4. Differences in GNI per capita between countries can be influenced by factors such as natural resources, labor productivity, and the distribution of wealth within a society.
5. Adjusting GNI for differences in purchasing power, known as GNI-PPP, allows for more accurate comparisons of living standards across countries.

Review Questions

• Explain how Gross National Income (GNI) differs from Gross Domestic Product (GDP) in the context of global stratification and classification.
  • Gross National Income (GNI) and Gross Domestic Product (GDP) are both measures of a country's economic output, but they differ in their scope. GNI includes the income earned by a country's citizens and businesses, regardless of their location, while GDP only includes the value of goods and services produced within the country's borders. This distinction is important in the context of global stratification and classification, as GNI provides a more comprehensive view of a country's economic resources and the overall well-being of its population, which is a key factor in determining a country's level of development and its position in the global economic hierarchy.
• Describe how GNI per capita is used to assess a country's standard of living and classify it within the global economic system.
  • GNI per capita, which is the total GNI divided by the country's population, is a widely used indicator of a country's standard of living. Countries with higher GNI per capita are generally classified as high-income or developed, while those with lower GNI per capita are considered middle-income or low-income, or developing. This classification system is important in the context of global stratification, as it helps to identify the economic disparities between countries and informs decisions about development assistance, trade policies, and other economic and social interventions aimed at reducing global inequality.
• Analyze how factors such as natural resources, labor productivity, and wealth distribution within a society can influence a country's GNI and its position in the global economic hierarchy.
  • A country's GNI and its corresponding position in the global economic hierarchy can be influenced by a variety of factors. Access to and effective utilization of natural resources, such as oil, minerals, or agricultural land, can contribute to a higher GNI. Similarly, a country's labor productivity, which is influenced by factors like education, technology, and infrastructure, can also impact its GNI. Additionally, the distribution of wealth within a society can play a role, as a more equitable distribution of income and resources can lead to a higher overall GNI and a stronger middle class, which is often associated with greater economic stability and development. Understanding these complex relationships between GNI, natural resources, labor productivity, and wealth distribution is crucial for analyzing global stratification and the dynamics that shape a country's position in the global economic system.

Related terms

Gross Domestic Product (GDP): GDP is the total value of all goods and services produced within a country's borders, regardless of who owns the factors of production.

Per Capita Income: Per Capita Income is the average income earned per person in a given area, typically a country or region, calculated by dividing the total income by the total population.

Purchasing Power Parity (PPP): PPP is a method of measuring and comparing economic productivity and standards of living between countries by adjusting for differences in the cost of living and inflation rates.