What is GNP and GDP?
GNP stands for Gross National Product while GDP stands for Gross Domestic Product. Both terms represent as indicators of the economic stability or soundness of a particular country. The main difference between the two economic indicators is that GDP has a scope limited to “domestic” location, while GNP covers all “products” in terms of ownership and regardless of location.
On specific terms, GNP refers to all products produced by citizens of a particular country domestically and internationally. This simply means that all earnings by citizens working in other countries are included in the computation for GNP. When computing GNP it includes the GDP value plus the earnings or income gained from citizens and enterprises abroad. In this sense, GNP presents the totality of the citizens’ earnings wherever they are in the world. Like in the case of countries who export many workers abroad, their earnings and the income of their businesses abroad are part of the GNP computation.
On the other hand, GDP refers only to the value of products and/or services of a particular country which are earned domestically for a given period. In economic computations, GDP computation is done on an annual basis. Whatever income is generated from citizens and enterprises on the domestic front are part of the GDP. In terms of computation, GDP includes the country’s consumption value, investments, government spending and the net value of exports minus the imports. In generic terms, GDP is the total worth of a country in terms of its products and/or services produced in its own soil.
Since both GDP and GNP give an overall value of a country’s economy, both may be used to assess economic soundness and stability. GDP is also widely regarded as an indicator of a country’s standard of living as it reflects the domestic resources and income of the country involved.