GNP attempts to measure the annual production of the economy. Non-productive transactions should not be included in its computation. What are 'non- productive transactions'?

GNP stands for Gross National Product, which is the total monetary value of all final goods and services produced in a country within a specific time period, typically a year. GNP is an important macroeconomic indicator that helps in understanding the size and health of an economy. The role of GNP is to assess the overall economic performance of a country.

Non-productive transactions are transactions that don't involve the production or creation of new goods and services in an economy. They are excluded from GNP because they do not contribute to the overall economic output or growth. Including these transactions would distort the GNP value and give an inaccurate representation of the health of an economy. Some examples of non-productive transactions are: 1. Financial transactions: These include buying and selling of stocks, bonds, and other financial instruments. They are considered non-productive because they just involve the transfer of financial assets and not actual goods and services. 2. Transfer payments: These are payments made by the government to individuals, such as social security benefits, unemployment benefits, and welfare payments. Transfer payments do not result in production of new goods and services, as they are not made in exchange for any product or service. 3. Used goods: Transactions involving the exchange of used goods, such as buying a used car or second-hand furniture, are also considered non-productive. These transactions do not lead to the creation of new goods, but rather the transfer of ownership of existing goods. 4. Private domestic services: These are services provided by individuals within their household, such as a parent cooking for their family or cleaning their own house. These activities do not contribute to the overall economic output as they are not formally part of the market.

Exclusion of non-productive transactions from GNP measurements is important for the accurate representation of a country's economic performance. Including these transactions would result in overstated GNP figures and an inaccurate picture of the health and growth of an economy. By focusing only on transactions that result in the production of new goods and services, GNP becomes a more reliable and relevant indicator for policy-makers to analyze economic trends and make informed decisions.