Difference between GNP and GDP
Answers
Answer:
The difference between GDP and GNP is that the former is the value of all the final goods and services produced within the boundary of a nation where as the latter ,i.e GNP is the GDP of a country added with its income from abroad that is here the trans-boundary economic activities of an economy is also taken into account.
GNP: An Overview. Gross domestic product (GDP) is the value of a nation's finished domestic goods and services during a specific time period. A related but different metric, the gross national product (GNP), is the value of all finished goods and services owned by a country's residents over a period of time.
What is GDP?
GDP refers to the Gross Domestic Product and is a widely used measure to determine the size of the economy of a nation. It represents the total amount of goods and services produced in a country within a financial year.
GDP takes into account the purchases of newly-produced goods and services for a particular period. In calculating GDP, the focus is on the total value of goods and services produced within the country borders, irrespective of whether the value addition is due to residents or non-residents of the country.
Also Read about GDP and Welfare
There are two methods of calculating GDP
Expenditure Approach
Income Approach
Expenditure Approach takes into account adding up all the amount spent on goods and services during the period.
GDP = C + I + G + (X-M)
where:
C = Consumption spending
I = Business investment (capital equipment, inventories)
G = Government Purchases
X = Exports
M = Imports
Income Approach: Under the Income Approach, the GDP is calculated by adding up three factors
GDP = National Income + Statistical Discrepancy + Capital Consumption Allowance
Also Check: MCQ on GDP Deflator
What is GNP?
GNP is known as Gross National Product, and it represents the total value of goods and services produced by the residents of a country during a financial year.
GNP takes into consideration the income earned by the citizens of the country present within or outside the country. It excludes the income generated by foreign nationals who are residing in the country. GNP can be calculated as
GNP = GDP + NR – NP
Where,
GDP = Gross Domestic Product
NR = Net Income Receipts
NP = Net outflow to foreign assets
Let us go through the most crucial differences between the GDP and GNP in the following table:
GDP
GNP
Definition
The value of goods and services produced within the geographical boundaries of a nation in a financial year is termed as GDP The value of goods and services produced by a citizen of a nation irrespective of geographical limits in a financial year is known as GNP
this all about GNP Or GDP
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