GNP stands for gross national product, a measure of a country’s output and input. Another common measure is GDP, or gross domestic product. Since both count the total goods and services produced by a country, and thus form the basis for economic and governmental policy decisions, understanding the difference between them is essential.
While both signify the strength of the economy, their calculation differs. GDP is domestic-oriented, while GNP is national-oriented. An easy way of conceiving the difference is to know that, by definition at least, GNP equals GDP plus total gains from overseas investment less income earned by foreign nationals domestically. In other words, GDP measures production only within national borders by citizens of that country. GNP measures the total value of goods and services produced by all nationals of a country, even if they reside abroad.
In other words, GDP measures production only within national borders by citizens of that country. GNP measures the total value of goods and services produced by all nationals of a country, even if they reside abroad.
By calculating gross national product figures on a per capita basis, a picture of the economic development of a country begins to appear, as well as a picture of the power of nationals to add value to resources.
To compare a country’s export business to its local economy, compare GNP to GDP. An assumption of both is that an increase in a country’s exports will increase GDP and GNP, but an increase in exports might increase GDP without increasing GNP (if, for example, the exporting company is not owned by a national of that country).
There are several approaches to calculating GNP. Most of them sum items such as consumption, investment, government expenditure, and the non-incidental net foreign factor income earned. Fortunately for our purposes here, these different approaches do not contradict one another.
While some economists argue that GDP alone is a sufficient measure of the economic health of a nation, an increasingly large majority point out that GDP alone cannot provide a complete picture of the productivity of a country, especially if a country is considered as a population of citizens grouped as a nationality.
Gross national product provides a more comprehensive picture of the health of an economy by factoring in the productive capabilities of all the nationals of a given country, despite their residence or place of business.