Gross national product (GNP) is the value of all goods and services produced by a country’s residents both domestically and abroad. Along with GDP (gross domestic product), GNP is one of the most commonly used measures of a country’s economy.
GNP can be calculated by adding consumption, private domestic investments, government, net exports, and foreign production by domestic firms. This number is then subtracted from the net income earned by foreign residents and businesses from domestic investment.
- Consumption: goods and services that consumers spend money on
- Private domestic investments: how much businesses are investing in domestic production
- Government: federal, state, and local government spending
- New exports: goods exported and sold in another county (minus imports)
- Foreign production by domestic firms: for example, if a U.S. company produces its goods overseas.
GNP vs. GDP
The key difference between GDP and GNP is that GDP looks at the value of goods and services produced within a country’s borders, while GNP considered how a country’s nationals are contributing to its economy. GNP does not include the output of foreign residents; therefore, any output by foreign residents must be excluded from the GNP calculation.
It is a good idea to look at both GDP and GNP when looking at a country’s economy. While GDP is a more widely followed measure of a country’s economic activity, it is still worthwhile to look at GNP because differences between GDP and GNP can indicate a country’s engagement in international trade and financial operations. GNP is a good indicator of the economic well-being of a country but does not offer as much insight into its economic health as GDP does. GNP’s limitations include being affected by foreign exchange rates, does not give insights into domestic resource usage, and does not do a good job of indicating whether the economy is growing.
Additionally, GNP makes it difficult to compare the economies of different countries. As businesses become more global, international networks become more complex and it becomes more difficult to compare one country’s economy to another’s.
The ten countries with the highest GNPs are: