What is the Difference Between GDP and GNP?

The main difference between Gross Domestic Product (GDP) and Gross National Product (GNP) lies in the scope of the economy they measure. Here are the key differences:

1. Definition: GDP is the value of the finished domestic goods and services produced within a nation's borders, while GNP is the value of all finished goods and services produced by a country's citizens, both domestically and abroad.
2. Scope: GDP measures the value of goods and services produced within a country's geographical boundaries, regardless of the citizenship of the producers. On the other hand, GNP measures the value of goods and services produced by a country's residents, regardless of their location.
3. Calculation: GNP can be calculated as GDP + Net income receipts (NR) - Net outflow to foreign assets (NP).
4. Economic Indicator: GDP is the most widely followed measure of a country's economic activity, while GNP is still relevant for certain analyses related to sources and uses of income.

In summary, GDP focuses on the economic activity within a nation's geographical boundaries, while GNP takes into account the economic activity generated by a nation's citizens, regardless of their location. Although GDP is the more popular measure, their values tend to be about equal.

Comparative Table: GDP vs GNP

Here is a table comparing the differences between GDP and GNP:

In summary, GDP focuses on the economic output within a country's borders, while GNP measures the economic output of a country's citizens and companies, no matter their location. GDP includes the income earned by foreign nationals in the country, whereas GNP does not.