GDP vs GNP

Differences Between GDP vs GNP

Gross domestic product considers the market value of all final goods and services produced by factors of production such as capital and labor located within a country or economy during the given period of time, generally a yearly or a quarterly. However, Gross national product considers the market value of all final goods and services produced by factors of production such as capital and labor supplied by citizens of a country, regardless of whether this similar production takes place internally within the province or outside of the country.

In this article, we look at the differences between GDP and GNP in detail.

What is GDP?

The total market value of the goods and services produced in a country within a certain time period is known as a Gross domestic product (GDP). it is the most widely used measure of the size of a nation’s economy. It includes only purchases of newly produced goods and services and does not include sale or resale of goods produced in previous periods. The transfer of payments made by the government such as unemployment, retirement, and welfare benefits are not economic output and are not included in the calculation of GDP.

• The values used in calculating GDP are the market values of final goods and services—that is, the value of the vehicle engine that Toyota makes is not explicitly included in GDP; their value is included in the final prices of Vehicles that use the engines. Similarly, the value of a Rembrandt painting that sells for 15 million euros is not included in the computation of GDP, as it was not produced during the period.
• The goods and services provided by government are covered in GDP even though they are not explicitly priced in markets. For instance, the services provided by police or the judiciary, and goods such as highways, dams and infrastructure improvements, are included Because these goods and services are not sold at market prices, GNP vs GDP is valued at their cost to the government.
• Gross domestic product stands for the monetary measure of all the finished goods and services produced within a country’s borders in a specific time period. Though GDP is usually calculated on an annual basis, or it can be calculated on a quarterly basis as well.

GDP can be computed by the following formula:

GDP = C + I + G + (X – M)

Where,

• C= Total Private Consumption
• I= Total Investment Amount
• G= Government Spending
• And, X – M= Difference between the export and Import of a country. 

What is GNP?

Gross national product (GNP) stands for an estimate of total measure of all the final products and services produced out in a given period by the means of production owned by the country’s residents. GNP is usually calculated by taking the sum of individual consumption expenditures, private domestic investment, government expenditure, net exports and any income earned by residents from overseas investments, minus income earned within the domestic economy by foreign residents. Net exports represent the difference between what a country exports minus any imports of goods and services.

GNP= GDP + NR – NP

Where,

• NR= Net Income Receipts
• NP= Net outflow to foreign assets

GDP vs GNP Infographics

Here we provide you with the top 5 difference between GDP and GNP

Examples of  GDP vs GNP

Depending on certainty, the GDP of a country can be either higher or lower than its GNP. It depends on the ratio of domestic to foreign producing in a given country. For example, China’s GDP is $300 billion greater than its GNP, according to public data available at various platforms, due to the large number of foreign companies Producing in the country, whereas the GNP of the U.S. is $250 billion greater than its GDP, because of the greater amounts of production that take place outside of the country’s borders.

Key Differences Between GDP vs GNP

The key difference between GDP and GNP are as follows –

• The aggregate of all the goods and the services generated within the of the country’s geographical limits is known as GDP and the aggregate of all the goods and services generated by the citizens of the country is known as GNP.
• GDP considers the production of products within the boundaries of the country. and on the other hand, GNP measures the production of products by the companies, industries and all other firms owned by the country’s residents.
• The fundamentals for calculating the GDP is the location, while GNP is based on citizenship.
• With the case GDP, the calculation of productivity is done on a country’s scale while we talk about GNP, its calculation is the productivity on an international level.
• GDP focuses on calculating domestic production, but GNP only considers on the production by the individuals, firms, and corporations, of the country.
• GDP measures the strength of a country domestic economy. On the other hand, the GNP measured how the residents are contributing towards the country’s economy.

GDP vs GNP Head to Head Differences

Let’s now look at the head to head difference between GDP and GNP

Basis for Comparison		GDP		GNP
Definition		Gross domestic product considers the market value of all final goods and services produced by factors of production such as capital and labor located within a country or economy during the given period of time, generally a yearly or a quarterly.		Gross national product considers the market value of all final goods and services produced by factors of production such as capital and labor supplied by citizens of a country, regardless of whether this similar production takes place internally within the province or outside of the country.
Measurement		Measures only domestic production.		Measures production by the nationals.
Includes		The production of goods and services by foreigners within that country.		The production of goods and services by its citizens outside of the country.
Excludes		The production of goods and services by its citizens outside of the country.		The production of goods and services by foreigners within that country.
Widely used		To study the outlines of the domestic economy.		To study how the residents are contributing to the economy.

GDP vs GNP – Conclusion

The key to the distinguishing point between these two is that while calculating GDP, we have to take into consideration all the things which is produced within the borders of the country and that it includes the goods and services which are produced by the foreign nationals also. While we talk about the GNP, we only consider the production done by the country’s resident, whether GNP vs GDP is within or outside the country and the production of foreign citizens are not included.

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