GNP vs. GDP

GNP vs. GDP

Both GNP and GDP are measures of income and tell us about the economic condition of a country.

GNP is the abbreviation of Gross National Product.

It is the total annual (per year) value of all final goods and services produced by citizens and companies born or set up in a given country, regardless where its citizens live and companies operate. It means that GNP embraces the income of, for example, German who lives in Germany, as well as German who lives outside Germany (Sweden, Italy or the US).

Usually it is calculated by summing the total value of all final goods and services produced within a given country in a particular year and income gained by its citizens and companies located abroad. From the received value we need to subtract the earnings of non-residents and foreign citizens (as well as foreign companies) located in that country, as they are not citizens and companies of the considered country.

GDP is the abbreviation of Gross Domestic Product .

It is also, like GDP the total value of all final goods and services, but in this case produced within a given country. So, here the citizenship is less important than place of residence. It means, that regardless the nationality, all income generated within a boundary of a given country is calculated, including the earnings of foreign companies. So in case of German who earns in Germany, his income is counted in GDP in Germany, but in case of German, who earns in the US, his income is counted in the GDP of the US.

So in summary:

GDP and GNP are measures of the economic condition of a given country (in the case of GDP) or nation (in the case of GNP). The relation between both indicators indicates the openness of a given economy - the larger the difference between a country's GNP and GDP, the bigger connections with international trade, finance and production.

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