Detailed discussion about GDP and GNP:

In economics, Gross Domestic Product (GDP) is used to calculate the total

value of the goods and services produced within a country’s borders, while
Gross National Product (GNP) is used to calculate the total value of the goods
and services produced by the residents of a country, no matter their location.
Essentially, GDP looks for the amount of economic activity within a nation’s
economy, while GNP looks at the value of the economic activity generated by
the nation’s people. This means that GNP will count the economic activities of
expatriates and other citizens outside the country’s borders but GDP will not,
and that GDP will consider the activities of non-citizens within those borders,
but GNP will not.

National income is a macroeconomic variable that helps in determining the

economic stability of a nation. It represents the total income accrued to a
country from all the economic activities in a year.
The most preferred way of calculating national income involves two
concepts, namely, GDP and GNP. GDP is known as Gross Domestic
Product, and GNP is known as Gross National Product.

What is GDP?
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.
GDP takes into account the purchases of newly-produced goods and services for
a particular period. In calculating 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 residents or non-residents of the country.

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There are two methods of calculating GDP
1. Expenditure Approach
2. Income Approach
Expenditure Approach takes into account adding up all the amount spent on
goods and services during the period.
GDP = C + I + G + (X-M)
where:
C = Consumption spending
I = Business investment (capital equipment, inventories)
G = Government Purchases
X = Exports
M = Imports
Income Approach: Under the Income Approach, the GDP is calculated by
adding up three factors

What is GNP?
GNP is known as Gross National Product, and it represents the total value of
goods and services produced by the residents of a country during a financial
year.
GNP takes into consideration the income earned by the citizens of the country
present within or outside the country. It excludes the income generated by
foreign nationals who are residing in the country. GNP can be calculated as
GNP = GDP + NR – NP
Where,
GDP = Gross Domestic Product
NR = Net Income Receipts
NP = Net outflow to foreign assets

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Let us go through the most crucial differences between the GDP and GNP in the
following table:

GDP GNP
Definition
The value of goods and The value of goods and
services produced within the services produced by a citizen
geographical boundaries of a of a nation irrespective of
nation in a financial year is geographical limits in a
termed as GDP financial year is known as GNP
What does it measure?
Measures only domestic Measures only the production
production by nationals
Emphasis
Production that is obtained Production that is achieved by
domestically citizens living in different
nations
Highlights
GDP highlights the strength GNP highlights the residents’
of the country’s economy contribution towards the
development of the economy.
Scale of operations
Local Scale International Scale
Excludes
Goods and services that are Goods and services that are
being produced outside the produced by foreigners living
economy. in the country.