GDP vs GNP

Updated on April 16, 2024
Article byWallstreetmojo Team
Reviewed byDheeraj Vaidya, CFA, FRM

Differences Between GDP and GNP

Gross Domestic Product (GDP) and Gross National Product (GNP) are considered to measure a country’s annual output, where Gross Domestic Product (GDP) is a measure of national production during the whole year. In contrast, Gross National Product (GNP) measures the annual output or manufacturing by a country’s citizens in their home country or abroad. Hence, the country’s border is not considered in the GNP calculation.

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, generally yearly or quarterly. However, the 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.

What is GDP?

The total market value of the goods and services produced in a country within a certain time is known as a Gross Domestic Product (GDP). It is the most widely used measure of the size of a nation’s economy. However, it includes only newly-produced goods and services purchases and does not include the sale or resale of goods produced in previous periods. In addition, 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 following formula can calculate GDP:

GDP = C + I + G + (X – M)

Where,

  • C= Total Private Consumption
  • I= Total Investment Amount
  • G= Government Spending
  • X – M= Difference between the export and import of a country 
GDP vs GNP

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What is GNP?

Gross National Product (GNP) estimates the total measure of all final products and services produced in a given period utilizing 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 exportsNet ExportsNet exports of any country are measured by calculating the value of goods or services exported by the home country minus the value of the goods or services imported by the home country. It includes various goods and services exported and imported by the government, like machinery, cars, consumer goods.read more, and any income earned by residents from overseas investmentsInvestmentsInvestments are typically assets bought at present with the expectation of higher returns in the future. Its consumption is foregone now for benefits that investors can reap from it later.read more, 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

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GDP vs. GNP Explained in Video

GDP vs GNP Infographics

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Example

Depending on certainty, a country’s GDP can be higher or lower than its GNP. It depends on a given country’s domestic to foreign production ratio.

For example, according to public data available on various platforms, China’s GDP is $300 billion greater than its GNP due to many foreign companies producing in the country. In contrast, 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

GDP vs GNP Comparative Table

Basis for ComparisonGDPGNP
DefinitionGross 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 time, generally yearly or 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.
MeasurementMeasures only domestic production.Measures production by the nationals.
IncludesThe production of goods and services by foreigners within that country.The production of goods and services by its citizens outside of the country.
ExcludesThe production of goods and services by its citizens out of the country.The production of goods and services by foreigners within that country.
Widely usedTo study the outlines of the domestic economy.To learn how the residents are contributing to the economy.

Conclusion

The key to distinguishing between these two is that while calculating GDP Calculating GDPGDP or gross domestic product refers to the sum of the total monetary value of all finished goods and services produced within the border limits of any country. GDP determines the economic health of a nation. GDP = C + I + G + NXread more, we have to consider all the things produced within the country’s borders. Therefore, it also includes the goods and services produced by foreign nationals. On the other hand, while we talk about the GNP, we only consider the production done by the country’s residents, whether within or outside the country, and the output of foreign citizens is not included.

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