Difference Between GDP and GNP and Their Importance

This post differentiates between Gross Domestic Product (GDP) and Gross National Product (GNP). Thereafter, the importance of both GDP and GNP is also being discussed.  

The table given below differentiates between GDP and GNP

Gross Domestic Product (GDP) 

Gross National Product (GNP) 

The total value of goods and services produced within the borders of the state is taken into account. GNP considers the total value of goods and services both within and outside the borders of the state is considered 
GDP considers the output of  both residents and foreigners GNP does not include the output of foreign residents. Instead, it considers the output of only the citizens of the country.
GDP helps determine the potential and plan economic progress by making use of the natural and human resources within the borders of a state. It guides in determining the potential to plan and maximize output by making better use of a country’s human resources both within and outside a country. 
Foreign exchange and remittances are not included in Gross Domestic Product (GDP) The calculation of Gross National Product (GNP) takes foreign exchange and remittances into account. 
GDP is an indicator of the local or national economy. It represents how both local and foreign investment contributes to the country’s economic growth. GNP represents how its nationals are contributing to the country’s economy. It factors in citizenship but overlooks location.

What is the importance of GDP and GNP? 

Economists use both GDP and GNP as measures of the aggregate output of a country in one year. They help determine the overall economic progress of a country in comparison with other states. They tell us whether the economy is growing or contracting. 

The governments use these calculations and numerical representation in economic, financial, and monetary planning to drive local economic growth. 

Economists and economic policy make use of GDP to compare different economies and as a key input for making investment decisions in a country.  Similarly, GNP gives an idea of how the individuals of a state perform in economic growth – thereby informing the govt to take important measures to increase human resources within and outside the borders.  

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