Both GDP and GNP measure economic strength and size. GDP stands for ‘Gross Domestic Product’ and GNP stands for ‘Gross National Product’. The differences between the two include how they are calculated and the ways that they are used.
What is GDP?
GDP is an estimated value of a country’s total worth of services and production. This includes all services and production within its boundary performed by its nationals and foreigners. It is calculated over the course of one year.
In other words, it calculates all the income that is earned within the country. It also takes into account income that is paid to foreign citizens.
What is GNP?
GNP is an estimated value of a country’s total worth of services and production. This includes all services and production performed by the citizens of that country within its borders and/or on foreign land. GNP is calculated over the course of one year.
GDP = consumption + investment + government spending + (exports – imports)
GNP = GDP + NR – NP
NR is the net income flow from assets abroad or more commonly known as Net Income Receipts.
NP is the net payment outflow to foreign assets.
Why it is used
GDP is used by countries to see the strength of their local economy. GNP is used to see how the nationals within a country are doing economically. Countries will use this to determine the economic stability of their citizens within their borders and those living abroad.
Key Differences between GDP and GNP
The below GDP vs GNP comparison table highlights the key differences again.