Real-World Example of Gross National Income
Gross National Income (GNI) is a metric for the overall earnings of a nation’s people and enterprises, both at home and abroad. It is frequently used to compare the wealth of other nations and serves as a gauge of a nation’s economic health.
Here is an example of how GNI is used in the real world:
Imagine that you are deciding where to invest resources for a development organization that you work for. Data on the GNI of several nations in the region where you work is provided to you. Once the data has been analyzed, you discover that Country A has a GNI of $10,000 per person while Country B has a GNI of $5,000. As a result, you can choose to provide Country B additional funding in order to alleviate economic disparity and raise the standard of living for its population. This shows that Country A is wealthier than Country B.
Another instance of how GNI is applied in practice is when deciding whether a nation qualifies for grants or loans or other forms of financial assistance. For instance, a nation with a very low GNI can be qualified for a development loan with more lenient terms, but a nation with a larger GNI might be required to pay a higher interest rate.
What Is Gross National Income (GNI)? Definition and Examples
A country’s economic production is measured by its gross national income (GNI), which is calculated by adding the values of all the goods and services it provides, including both domestic and international sources of revenue. Gross domestic product (GDP), which measures a nation’s internal economic output, and GNI are related concepts. GNI, however, takes into account revenue from international sources, including overseas earnings made by domestic businesses or foreign investments.
GNI is often used to measure a nation’s economic progress and level of life as well as to compare the financial health of various nations. Additionally, the World Bank and other international organizations use it to divide nations into income categories according to the level of their economic growth.
It can be calculated using a number of different methodologies, such as the Atlas, World Bank, and IMF approaches. The Atlas technique, which is based on the country’s currency’s market exchange rates, is the one that is most frequently utilized. Purchasing power parity (PPP) exchange rates, which account for regional variations in the cost of living, are used in both the World Bank and the IMF methods.