gdp and gnp 4 diffrences
Answers
Answer:
GDP measures the value of goods and services produced within a country's borders, by citizens and non-citizens alike. GNP measures the value of goods and services produced by only a country's citizens but both domestically and abroad.
The GDP takes the purchases of newly produced goods and services for a particular period into account. In calculating the 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 the residents or non-residents of the country.
It takes the income earned by the citizens of the country present within or outside the country into consideration. It excludes the income generated by the foreign nationals who are residing in the country. It can be calculated as:
GNP = GDP + NR – NP
Where,
GDP = Gross domestic product
NR = Net income receipts
NP = Net outflow to foreign assets.
There are two methods of calculating GDP. They are:
Expenditure approach
Income approach
The 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 investments (Capital equipments, 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.
It emphasises on the production that is obtained domestically.
It emphasises on the production that is achieved by the citizens living in different nations