Economics Gdp Questions Medium
Gross Domestic Product (GDP) and Gross National Product (GNP) are both measures used to quantify the economic performance of a country, but they differ in terms of what they measure and the scope of their coverage.
GDP measures the total value of all goods and services produced within a country's borders during a specific period, typically a year. It includes the production by both domestic and foreign-owned firms operating within the country. GDP focuses on the economic activity that takes place within the country's geographical boundaries, regardless of the nationality of the producers.
On the other hand, GNP measures the total value of all goods and services produced by the residents of a country, regardless of their location. It includes the production by domestic firms both within and outside the country's borders. GNP takes into account the nationality of the producers, considering the income earned by the country's residents, whether they are located domestically or abroad.
The key difference between GDP and GNP lies in the treatment of income earned by foreign residents within the country and income earned by domestic residents abroad. In GDP, income earned by foreign residents within the country is included, while income earned by domestic residents abroad is excluded. In GNP, the opposite is true, as income earned by domestic residents abroad is included, while income earned by foreign residents within the country is excluded.
To summarize, GDP measures the total value of goods and services produced within a country's borders, regardless of the nationality of the producers, while GNP measures the total value of goods and services produced by the residents of a country, regardless of their location.