GDP vs. GNP — What's the Difference?
By Maham Liaqat & Fiza Rafique — Updated on May 16, 2024
GDP (Gross Domestic Product) measures the total value of goods and services produced within a country's borders, while GNP (Gross National Product) measures the total value of goods and services produced by a country's residents, regardless of location.
Difference Between GDP and GNP
Table of Contents
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Key Differences
GDP (Gross Domestic Product) represents the total monetary value of all goods and services produced within a country's borders over a specific period, typically annually or quarterly. It includes production by both domestic and foreign entities operating within the country. GNP (Gross National Product), on the other hand, measures the total value of goods and services produced by the residents of a country, regardless of where they are located. This includes the income residents earn abroad but excludes the income earned by foreign residents within the country.
GDP is often used as an indicator of a country's economic health and performance, reflecting domestic economic activity. It is a key metric for comparing the economic productivity and living standards of different countries. GNP provides a broader perspective by accounting for the economic activities of nationals both inside and outside the country, thus reflecting the overall economic strength of a nation's residents.
The calculation of GDP focuses solely on the location of production, capturing the economic output within the geographical boundaries of a country. This makes it a useful measure for understanding the domestic economy's capacity and growth. GNP adjusts GDP by adding income earned by nationals abroad and subtracting income earned by foreigners domestically, offering insight into the economic contributions of a country's residents globally.
Differences between GDP and GNP can highlight the impact of international economic activities. For example, a country with significant foreign investments and expatriate workers might have a higher GNP than GDP. Conversely, a country with many foreign businesses operating within its borders might have a higher GDP than GNP.
Comparison Chart
Definition
Value of all goods and services produced within a country's borders
Value of all goods and services produced by a country's residents
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Scope
Domestic production, regardless of ownership
Production by nationals, regardless of location
Inclusion
Domestic and foreign companies within the country
Domestic production plus income from abroad, minus income of foreigners
Economic Indicator
Measures domestic economic performance
Measures overall economic strength of residents
Calculation Focus
Geographical boundaries
Nationality of producers
Compare with Definitions
Gdp
Includes production by domestic and foreign entities within the country.
Foreign companies' factories in China contribute to China's GDP.
Gnp
Useful for understanding the global economic impact of a nation’s residents.
Ireland’s GNP is influenced by its multinational corporations’ global operations.
Gdp
The total value of goods and services produced within a country.
The GDP of the United States grew by 2% last year.
Gnp
The total value of goods and services produced by a country's residents.
The GNP of Japan includes earnings from Japanese businesses abroad.
Gdp
Measured annually or quarterly.
Quarterly GDP reports provide insights into economic trends.
Gnp
Reflects the overall economic strength of nationals.
A high GNP indicates significant international income.
Gdp
Used to compare economic productivity between countries.
Germany’s GDP is higher than that of many smaller European countries.
Gnp
Accounts for income earned abroad by residents and subtracts income earned by foreigners domestically.
Remittances from overseas workers increase the Philippines' GNP.
Gdp
An economic indicator of a country’s domestic performance.
A rising GDP indicates a growing economy.
Gnp
Provides a broader economic perspective beyond domestic borders.
A country with many expatriates may have a high GNP relative to its GDP.
Gdp
Measure of the United States economy adopted in 1991; the total market values of goods and services by produced by workers and capital within the United States borders during a given period (usually 1 year)
Gnp
Former measure of the United States economy; the total market value of goods and services produced by all citizens and capital during a given period (usually 1 yr)
Common Curiosities
Which measure better reflects domestic economic activity?
GDP better reflects domestic economic activity as it focuses on production within the country's borders.
Why is GDP important?
GDP is important because it provides a snapshot of a country's economic performance and productivity within its borders.
Why might a country have a higher GDP than GNP?
A country might have a higher GDP than GNP if it has substantial foreign investments or many foreign workers contributing to domestic production.
Can a country’s GNP be higher than its GDP?
Yes, if a country’s residents earn significant income from abroad, its GNP can be higher than its GDP.
Why do economists use both GDP and GNP?
Economists use both metrics to get a comprehensive view of economic performance, both domestically and internationally.
How does foreign investment impact GDP and GNP?
Foreign investment increases GDP by boosting domestic production, but it might not affect GNP if profits are repatriated to foreign investors.
What is the primary difference between GDP and GNP?
GDP measures the value of goods and services produced within a country, while GNP measures the value produced by the country's residents, regardless of location.
How does GNP differ in calculation from GDP?
GNP is calculated by adding the income earned by residents abroad and subtracting the income earned by foreigners within the country from GDP.
What does a high GNP indicate?
A high GNP indicates strong economic performance by a country's residents, both domestically and internationally.
Can GDP and GNP provide different perspectives on economic health?
Yes, GDP focuses on domestic production, whereas GNP provides insight into the economic contributions of a nation's residents globally.
What role do multinational corporations play in GDP and GNP?
Multinational corporations contribute to GDP through their domestic operations and to GNP through their international earnings and activities.
How do GDP and GNP affect economic policy?
Policymakers use GDP to assess and guide domestic economic policies, while GNP can influence policies related to international trade and investment.
How do remittances affect GNP?
Remittances from residents working abroad increase GNP, as they count as income earned by nationals.
Which is more relevant for assessing living standards?
GDP is often more relevant for assessing living standards within a country, as it measures domestic economic activity and productivity.
Can GDP growth occur without GNP growth?
Yes, GDP growth can occur without GNP growth if domestic production increases but income from abroad decreases or remains stagnant.
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Written by
Maham Liaqat
Co-written by
Fiza RafiqueFiza Rafique is a skilled content writer at AskDifference.com, where she meticulously refines and enhances written pieces. Drawing from her vast editorial expertise, Fiza ensures clarity, accuracy, and precision in every article. Passionate about language, she continually seeks to elevate the quality of content for readers worldwide.
