What is mean by GDP and GNP? (Definition)

Gross Domestic Product (GDP) and Gross National Product (GNP) are different various concepts of National Income. Here is the definition of both...

Gross Domestic Product (GDP)

Gross Domestic Product (GDP) is the market value of all final goods and services produced by all factors of production whether domestic or foreign within the geographical territory of a country, in a year. GDP does not include Net factor income from abroad NFIA. It has quite a narrow concept. GDP is focused on output rather than who produced i. It means GDP measures all domestics’ production regardless of the nationality of factors of production. It does not include NFIA so, it is unaffected by NFIA.

Gross National Product (GNP)

Gross National Product (GNP) is the market value of all the final goods and services produced by all domestic factors of production within or out of the geographical territory of a nation, in a year. GNP includes NFIA. It measures the overall economic strength of the domestic country. It has a broader concept. GNP is focused on who owns the production regardless of where the production takes place.

The formula of GDP is: C + I +G + (X-M)

The formula of GNP is: GDP + NFIA

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