Question

Explain the difference between GDP and GNP using an example. Mention a circumstance where the use of GNP may be a more accurate presentation of output than the use of GDP.

Answer 1

Answer:

Differences

Definition

GDP

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 quarterly.

GNP

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

GDP

Measures only domestic production.

GNP

Measures production by the nationals.

Includes

GDP

The production of goods and services by foreigners within that country.

GNP

The production of goods and services by its citizens outside of the country.

Excludes

GDP

The production of goods and services by its citizens outside of the country.

GNP

The production of goods and services by foreigners within that country.

Widely used

GDP

To study the outlines of the domestic economy.

GNP

To study how the residents are contributing to the economy.

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