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GDP Vs GNP

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Published in: Economics
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Basic of difference between GDP and GNP

Kumar / Kolkata

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  1. Measuring Economic Growth Measures of national income and output are used in economics to estimate the value of goods and services produced in an economy. Some of the common measures are Gross National Product (GNP) and Gross Domestic Product (GDP). Gross Domestic Product (GDP) GDP is defined as the total market value of all final goods and services produced within the country in a given period of time usually a calendar year or financial year. GDP can be real or nominal. a) Nominal GDP refers to the current year production of final goods and services v ue at current year prices. b) Real GDP refers to the current year production of goods and service a ued all base year prices. Imp: It factor out Inflation. Note: In estimating GDP, only final marketable goods and servi es are considered. It means that gains from resale are excluded but the services provided by the agents are cou te . imilarly, transfer payments (pensions, scholarships etc) are excluded as there is income received but no goo or service produced in return. Gross National Product (GNP) GNP is a measure of the value of the output produ e by the ationals" of a country- both within the geographical boundaries and outside. Difference between GDP & GNP 1. 2. GNP adds net foreign vestment income compared to GDP. It means all the output that the Indian citizens produce in a given year - both within India and all other countries. It includes all the produce of Indian citizen(whether livin in India or Outside) and exclude all produce of Foreign non-citizens(whether in India or outside GDP shows ho Lich is produced within the boundaries of the country by both the citizens and the Vkj foreigners„ his Che ar et value of all the output produced in the territory of a nation in one year. GDP focuses where he output is produced rather than who produced it. For example, ere are Indian and foreign firms operating in India. Together what they produce within the Indian geography is the GDP of India. The profits of foreign firms earned within India are included in India's GDP, but not in India's GNP. Open Economy: - If it is an open economy but more of its nationals tend to move economic activity abroad or earn more from investing abroad compared with non-nationals doing business and earning incomes within its borders, its GNP will be than GDP. If it is a closed economy where nobody leaves its shores, nobody invests abroad, nobody comes in and nobody invests in the country, its GDP will be equal to GNP.

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