Can You Differentiate Between GNP And GDP?


4 Answers

Mary Frederick Profile
Mary Frederick answered
Gross Domestic Product (GDP) and Gross National Product (GNP) are terms used in an attempt to measure national wealth.

The use of these measures determines variances of the wealth of the economy, especially in the areas of manufacturing, agriculture and the service industries of a country. Basically these terms represent how much money has been made in the economy over a specific number of months or a year or more.

GDP is the income from aboard subtracted from the income made by domestic companies from foreign companies, the result is the Gross Domestic Product.

GNP is based on per capita, which means the country's wealth is divided by the population of the country. The Gross National Product is not the best indicator of a country's wealth because it is less exact.

However, today there is movement toward a newer measure called Purchasing Power Parity (PPP).
Akshaya Kumar Jena Profile
The difference between GDP and GNP is that while the former takes into account all the final goods produced in the domestic country whoever may produce these, the latter takes into account all the final goods produced by the domestic nationals wherever they may produce these. If we think in terms of capabilities of the people of a particular country, GNP is obviously better. But for the ease of calculation, countries are increasingly switching to GDP measure in recent years.
Mahwash Marcel Profile
Mahwash Marcel answered
Generally the students do not keep the difference between gross national product (GNP) and gross domestic product (GDP) in view which can culminate into the various conceptual errors. There are various production sectors in every country and each sector produces a particular quantity of goods. Different raw materials are used in producing the goods. For instance, cotton is used for producing cloth, for which the farmer uses the seeds, fertilizers, insecticides, pesticides, etc. The production, in this manner, is divided into different parts. It should be noted that on every next stage of production, the value is added in the production. For example, the value of the yarn as compared to raw cotton, cloth as compared to yarn and garments as compared to cloth is always higher. In other words, the total value of finished goods is nothing but the aggregate of the stage wise additions. The total quantity of product, in this way, is called 'Gross Domestic Product'.

These goods are produced in the country but are exported to other countries, are deduced from the Gross Domestic Product and what ever is earned by the local people from other countries is added. In this way, what ever is achieved finally is called 'Gross National Product'.
Anonymous Profile
Anonymous answered
The GDP is a good measure for developing countries because it involves production taking in the country. Furthermore it is used for making caparisons between a country and the rest of the world more easily

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