Economy

Difference between GDP and GNP

Main difference

During the business career, students come across certain terms that sound familiar to them, but do not know the exact meaning, two similar names are GDP and GNP, which are used quite often during political debates and in business conversations. Expanding what they really represent, GDP is the Gross Domestic Product, while the GNP is the Gross National. What it really means and results are the differences between them will be discussed now. Gross Domestic Product is a country’s total monetary estimate of the activities of the people living in that particular area. The Gross National Product, on the other hand, is the complete financial calculations of a country regardless of its location. GDP is calculated by what foreigners who live in that particular country invest, but investments made by citizens living abroad are not counted. The GNP does not consider the total investments made by non-natives. The difference between them helps to determine to what extent the country is dependent or makes a foreign investment, for example, if the difference is significant, it means that the country participates in trade with other nations. The formulas to calculate both terms are different and for GDP the formula is total consumption + total investment + public spending + (the difference in exports – imports). For GNP the formula is GDP + Average income of nationals residing abroad (Average payment of external assets). The GNP does not consider the total investments made by non-natives. The difference between them helps to determine to what extent the country is dependent or makes a foreign investment, for example, if the difference is significant, it means that the country participates in trade with other nations. The formulas to calculate both terms are different and for GDP the formula is total consumption + total investment + public spending + (the difference in exports – imports). For GNP the formula is GDP + Average income of nationals residing abroad (Average payment of external assets). The GNP does not consider the total investments made by non-natives. The difference between them helps to determine to what extent the country is dependent or makes a foreign investment, for example, if the difference is significant, it means that the country participates in trade with other nations. The formulas to calculate both terms are different and for GDP the formula is total consumption + total investment + public spending + (the difference in exports – imports). For GNP the formula is GDP + Average income of nationals residing abroad (Average payment of external assets). it means that the country participates in trade with other nations. The formulas to calculate both terms are different and for GDP the formula is total consumption + total investment + public spending + (the difference in exports – imports). For GNP the formula is GDP + Average income of nationals residing abroad (Average payment of external assets). it means that the country participates in trade with other nations. The formulas to calculate both terms are different and for GDP the formula is total consumption + total investment + public spending + (the difference in exports – imports). For GNP the formula is GDP + Average income of nationals residing abroad (Average payment of external assets).

Comparative chart

GDP GNP
Name Gross domestic product Gross national product
Function The total value of all goods and services that are completed within a country The total value of all rights and services that are completed by the nationals of a particular country.
Population The total investment made by foreign companies and individuals is taken into consideration. Investments made by non-citizens are not considered
Investment Total investment made by other companies in a particular country It shows the investments made by local companies in other nations.

Definition of GDP

GDP is known as Gross Domestic Product and is the sign of the total economy of a country. It is defined as the total money raised after all goods and services are completed in a period of time, which is generally one year. It can also be calculated quarterly or after each year depending on the changes. Everything from total investments, total goods consumed, government spending, and the difference in import and export, is included when calculating a country’s GDP. There are three different ways of calculating gross domestic product called the expense, output, and income basis. All these processes will give the same result and if they are divided into segments they will provide more precision. If GDP grows at a healthy rate, it translates into more foreign investment due to the stability and gradual improvement of the local economy, which is the only criterion for investors who want to spend their money where they can get a good return. Shows the total economic activity that has taken place is a complete document that includes the total consumption of the public and private sectors as services and goods. Total government spending on defense, construction and education. Foreign and local investments and all imports and exports. Total government spending on defense, construction and education. Foreign and local investments and all imports and exports. Total government spending on defense, construction and education. Foreign and local investments and all imports and exports. That is the only criterion for investors who want to spend their money where they can get a good return. Shows the total economic activity that has taken place is a complete document that includes the total consumption of the public and private sectors as services and goods. Total government spending on defense, construction and education. Foreign and local investments and all imports and exports. Total government spending on defense, construction and education. Foreign and local investments and all imports and exports. Total government spending on defense, construction and education. Foreign and local investments and all imports and exports. That is the only criterion for investors who want to spend their money where they can get a good return. Shows the total economic activity that has taken place is a complete document that includes the total consumption of the public and private sectors as services and goods. Total government spending on defense, construction and education. Foreign and local investments and all imports and exports. Total government spending on defense, construction and education. Foreign and local investments and all imports and exports. Total government spending on defense, construction and education. Foreign and local investments and all imports and exports. Shows the total economic activity that has taken place is a complete document that includes the total consumption of the public and private sectors as services and goods. Total government spending on defense, construction and education. Foreign and local investments and all imports and exports. Total government spending on defense, construction and education. Foreign and local investments and all imports and exports. Total government spending on defense, construction and education. Foreign and local investments and all imports and exports. Shows the total economic activity that has taken place is a complete document that includes the total consumption of the public and private sectors as services and goods. Total government spending on defense, construction and education. Foreign and local investments and all imports and exports. Total government spending on defense, construction and education. Foreign and local investments and all imports and exports. Total government spending on defense, construction and education. Foreign and local investments and all imports and exports. Foreign and local investments and all imports and exports. Total government spending on defense, construction and education. Foreign and local investments and all imports and exports. Total government spending on defense, construction and education. Foreign and local investments and all imports and exports. Foreign and local investments and all imports and exports. Total government spending on defense, construction and education. Foreign and local investments and all imports and exports. Total government spending on defense, construction and education. Foreign and local investments and all imports and exports.

Definition of GNP

The GNP is called Gross National Product and is a measure of the total economic activity of the residents of a country. It is defined as a detailed explanation of the total value of the finished goods and services of a country and its nationals. In broader terms, it is the complete description of all the products and services that were carried out in a country and the total amount of money earned by people that is then separated from the total income earned by residents of the country who are not nationals. . This measure also includes citizens of the state who do not reside in the country but contribute to its economy. A general estimate is that a real GNP indicates a good standard of living within a country. In simple words it is the total profit of the citizens and companies of a country minus the total income of the residents and foreign companies. There is a particular formula that helps to calculate the total gross national product of a country. It is usually calculated annually, especially during a budget year.

Differences in a nutshell

  1. The Gross Domestic Product is the total value of all the goods and services that are completed within a country, while the Gross National Product is the total value of all the rights and services that are completed by the nationals of a particular country, regardless of your location.
  2. For GDP, the total investment made by foreign companies and individuals is taken into account, while the GNP does not take into account investments made by non-citizens.
  3. For GDP, the total income of nationals who are not in the country is not counted, while GNP is calculated as the total income of all citizens regardless of their location.
  4. GDP shows the total investment made by other companies in a particular country, while GNP shows the investments made by local companies in other nations.
  5. GDP indicates how the overall economy is doing, while GNP shows how the people of a country are doing economically.

Final Thought

Whenever you listen to the news and hear terms like GDP and GNP, there is always a need to know more about them. If that were the case, hopefully this article would have helped give a clearer idea of ​​what the terms mean and how they are used in economics, all for people who want more clarity on the subject.

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