Differences between GDP and GNP

Differences between GDP and GNP: GDP and GNP are two of the preferred methods by which the national income is calculated. Before getting to know about the differences between GDP and GNP, let us look at what GDP and GNP are.

What is GDP?

GDP stands for Gross Domestic Product. GDP refers to the total amount of goods and services produced in a country in a financial year. It is a very important measure for determining the size of the economy.

In calculating the GDP, the total value of goods and services produced within the geographical boundaries of a country. This does not differentiate between the goods and services produced by residents and non-residents of the country.

The formula for calculating GDP is as follows:

GDP = C + I + G + (X – M)

Where,

C = Consumption spending

I = Business investments 

G = Government purchases

X = Exports

M = Imports

What is GNP?

GNP on the other hand refers to the Gross National Product and it is the value of goods and services produced by the residents of a country in a financial year.

The formula for calculating GNP is:

GNP = GDP + NR – NP

Where,

GDP = Gross domestic product

NR = Net income receipts

NP = Net outflow to foreign assets

GNP includes the earnings made by residents of the nation present inside and outside the country while deducting the earnings made by foreign nationals who are residing in the country.

GDP and GNP Differences

Differences between GDP and GNP are as follows: