What Is Gross National Product (GNP)?
Gross national product (GNP) is the sum of all domestic and foreign output created by citizens of a given country. It can be measured by spending or by income. GNP includes activities by citizens and companies abroad, but excludes activities by foreigners within the country.
GDP vs. GNP
GDP (or gross domestic product) is another common metric that’s used to measure the economic activity of a country. The main difference between GDP and GNP is that GDP is limited to activity within a country’s borders. Here’s a quick breakdown on how the two compare:
NNP vs. GNP
Net national product (NNP) is another economic indicator that is similar to GNP. However, the main difference is that it also considers the loss in value of physical capital. In other words, net national product is gross national product minus depreciation.
GNI vs. GNP
Gross national income (GNI) also measures the amount of money earned by a nation's people and businesses. However, the main difference between GNI and GNP is that GNI measures income rather than output. It is calculated by adding foreign income earned by citizens to GDP and subtracting domestically generated income sent to foreign citizens.
How to Calculate GNP
Gross national product is an economic indicator that measures the total value of all goods and services produced by a country's residents, regardless of production location. It consists of gross domestic product plus income earned by foreign residents living abroad (minus domestic income generated by non-residents).
What Is the Gross National Product Formula?
Example of GNP
Assume that Country ABC spends a total of $100 million on consumption, $75 million on investments, and $200 million on government expenditure. Additionally, the country spends $50 million on imports and sells $25 million of exports.
Country ABC also has multiple citizens and businesses in foreign countries who generate another $150 million in income. The foreign businesses that operate within the country earn $50 million, which is sent back to their home countries.
Using the formula above, we can calculate the GNP for Country ABC:
GNP = C + I + G + X + Z
Consumption = $100 million
Investments = $75 million
Government expenditure = $200 million
X [Net Exports (Value of exports - value of imports)] = -$25 million
Z [Net Income (Net income inflows from abroad - net income outflows)] = $100 million
GNP = 100m + 75m + 200m + -25m + 100m = $450 million
Therefore, we can conclude that Country ABC’s GNP is $450 million.
GNP Per Capita Examples
At the end of 2019, the United States’ GNP was $21.85 trillion and its population was 329.45 million. Using the formula above, we can calculate the GNP per capita for 2019:
Therefore, we can conclude that the 2019 US GNP per capita was $66,322.66.
Why Is GNP Important?
Unlike GDP—which focuses on the output created within the borders of a country—GNP measures the output generated by its citizens, regardless of their location. Since residents now have more opportunities to earn money from both domestic and foreign sources, GNP is a more accurate indicator of average productivity.
However, the two measures are often used together. A large gap between GDP and GNP indicates significant involvement in international trade and finance or that a large proportion of citizens live and work abroad, whereas a small gap indicates that most output is generated within the country’s borders.
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