What Is the Difference Between GDP and GNP?
Thank you for reading this post, don't forget to subscribe!Thank you for reading this post, don't forget to subscribe!In economics, GDP is generally used to calculate the value of goods and services produced within a country’s borders, while GNP is used to calculate the total value of goods and services produced by residents of a country, no matter their location.
GDP looks for the amount of economic activity within a nation’s economy, while GNP looks at the value of the economic activity generated by the nation’s people.
GDP refers to the amount of economic activity in a nation’s economy, while GNP refers to the value of economic activity produced by the nation’s people.
What Is GDP?
GDP or gross domestic product, measures the total economic value of all final goods and services produced within a country’s borders during a specific period of time.
There are two methods of calculating GDP. They are:
Expenditure approach
Income approach
The expenditure approach takes into account adding up the entire amount spent on goods and services during the period.
GDP = C + I + G + (X – M)
Where,
C = Consumption spending
I = Business investments (Capital equipment, inventories)
G = Government purchases
X = Exports
M = Imports
Income approach: Under the income approach, the GDP is calculated by adding up three factors.
GDP = National income + Statistical discrepancy + Capital consumption allowance
What is GNP?
GNP (Gross national product) is known as gross national product and represents the total value of goods and services produced by the residents of a country during a financial year.
It takes the income earned by the citizens of the country present within or outside the country into consideration. It excludes the income generated by the foreign nationals who are residing in the country. It can be calculated as:
GNP = GDP + NR – NP
Where,
GDP = Gross domestic product
NR = Net income receipts
NP = Net outflow to foreign assets
Let us see the most important differences between GDP and GNP in the following table.
I hope you got good information about GDP and GNP.