State with reasons whether you agree or disagree with the following statements: Gross National Product and Gross Domestic Product are the same concepts.

State with reasons whether you agree or disagree with the following statements:

Gross National Product and Gross Domestic Product are the same concepts.

No, I disagree with the statement given above. Gross National Product (GNP) and Gross Domestic Product (GDP) are two different concepts. GNP is the money value of all final goods and services produced by the normal residents of a country both within the domestic territory as well as outside of the country during an accounting year. It includes all the factor incomes from abroad and excludes all the factor payments made abroad.  On the other hand, GDP is the money value of all final goods and services produced within the geographical boundaries of a country during an accounting year. As GDP is limited to the domestic territory, it does not consider factor incomes from abroad or factor payments made abroad.
Thus, to conclude the basis of difference between GDP and GNP is that while the former does not include net factor income from abroad, the latter includes this component.

GNP = GDP + NFIA

No comments: