How is gdp different than gnp. Explain with examples?
Answers
Explanation:
GNP and GDP both reflect the national output and income of an economy. The main difference is that GNP (Gross National Product) takes into account net income receipts from abroad. GDP (Gross Domestic Product) is a measure of (national income = national output = national expenditure) produced in a particular country.
GDP stands for Gross Domestic Product
GNP stands for Gross National Product
The major differences between GDP and GNP are:-
At Market prices
- Gross Domestic Product at Market Prices(GDPmp):- It is the market value of all final goods and services at prices prevailing in the market produced in the domestic territory of a country during a given year.
- Gross National Product at Market prices(GNPmp):- It is defined as the aggregate market value of all final goods and services produced by national residents of a country during a given year within the domestic territory of a country inclusive of net factor income from abroad within a given year.
At Factor Cost
- Gross Domestic Product at Factor Costs(GDPfc):- It is the sum total of earnings received by various factors of production in terms of wages, interests, rent, profit etc within the domestic territory of a country during a given year.
- Gross National Product at Factor Costs(GNPfc):- It is the sum total of earnings received by various factors of production in terms of wages, rent, interest, profits etc by normal residents of a country in domestic territory and abroad country during a given year including.
When income earned by domestic firms in abroad is more than the income earned by abroad territory or firms in the domestic country then the Gross National Product (GNP) is more than Gross Domestic Product (GDP).
Example :-
When an Indian company like Tata Group whose 75% of revenue comes from abroad and 25% from domestic territory then it will have a higher GNP rate than Its GDP.
When Indian companies like Toyota India who's sale is more in domestic territory than abroad then it will have a higher GDP rate than its GNP.
#SPJ3