Measuring national income
GDP measures the total value of all goods and services produced within a country's borders, regardless of who owns the producing businesses. GNP adjusts this to measure income earned by that country's citizens/residents, wherever in the world they earned it, adding income earned abroad and subtracting income foreigners earned domestically.
Example 1: A country's GDP is ₦50 trillion. Its citizens earn ₦2 trillion from investments abroad, and foreigners earn ₦3 trillion from investments within the country. Find the country's GNP.
trillion naira.
The circular flow of income
In its simplest form, households supply factors of production (land, labour, capital) to firms and receive income (rent, wages, interest, profit) in return; firms use these factors to produce goods and services, which households buy using that income, spending flows back to firms. This continuous cycle links income, spending, and production across the economy.
Economic planning
Economic planning involves a government setting deliberate goals and strategies for national development over a period -- for example, targets for infrastructure, industrialization, or poverty reduction -- and coordinating policies (spending, taxation, regulation) to work towards them, rather than leaving all outcomes purely to market forces.