2) What is the difference between GDP and GNP?

Which one is a better

measure of the economic performance of a country?

GDP refers to the gross domestic product and is a widely used measure to determine the size of the
economy of a nation. It represents the total amount of goods and services produced in a country within
a financial year.
The GDP takes the purchases of newly produced goods and services for a particular period into
account. In calculating the GDP, the focus is on the total value of goods and services produced within
the country borders, irrespective of whether the value addition is due to the residents or non-residents
of the country.

GNP is known as gross national product and represents the total value of goods and services produced
by the residents of a country during a financial year.
It takes the income earned by the citizens of the country present within or outside the country into
consideration. It excludes the income generated by the foreign nationals who are residing in the
country. It can be calculated as:

GDP AND GNP DIFFERENCE IN TABLE

GDP(Gross domestic product) GNP(gross national product)

Gross Domestic Product considers the market value of
all final goods and services produced by factors of
production such as capital and labor located within a
country or economy during the given time, generally
yearly or quarterly.
Gross National Product considers the market value of all
final goods and services produced by factors of
production such as capital and labor supplied by citizens
of a country, regardless of whether this similar
production takes place internally within the province or
outside of the country.

Measures only domestic production. Measures only domestic production.

Include the production of goods and services by Include the production of goods and services by its
foreigners within that country. citizens outside of the country.

Exclude the production of goods and services by its the production of goods and services by foreigners
citizens out of the country. within that country.

Used to study the outlines of the domestic economy. Used to learn how the residents are contributing to the
economy.