Gross National Product (and GDP)

Grossnationalproduct (gnp) is one of the most comprehensive measures of the overall amount of economic production taking place in a national economy. The first set of national accounts, prepared under Simon Kuznets, Nobel Prize Laureate in Economics, was presented to the United States in 1937. Kuznets helped the U.S. Department of Commerce to standardize the measurement of GNP.

Since World War II, GNP has been regarded as the most important indicator of the status of an economy. GNP is the sum of the different kinds of earnings permanent residents receive in a given country, plus any income earned by residents from investments abroad such as profits, interests, and royalties. While Gross Domestic Product (GDP) measures economic activity within a country's borders, the GNP measures the total income of a country's population. It adds rents, interest, and profits and dividends flowing into the country to GDP, while deducting rents, interests, and profits and dividends paid out to foreigners. At present, GDP is preferred to GNP because policy makers are usually interested in the level of economic activity within a country's borders. In most cases, GDP and GNP are approximately equivalent, although for some countries with a large foreign presence, such as Ireland, GNP is the preferred measure.

GNP in economics is a quantitative measure to assess a country's total economic activity. The GNP equals the GDP plus income earned by domestic residents through foreign investments, minus the income earned by foreign investors in the domestic market. GNP at current market prices is equal to gross national product at factor cost plus taxes on expenditure less subsidies. It represents the total expenditure on the output of goods and services of the national economy valued at the prices at which the expenditures are incurred. The expenditure is made up of personal expenditure on consumers' goods and services, net expenditure by central and local government on current goods and services, gross domestic physical capital formation (comprising fixed capital and stocks), and net expenditure by the rest of the world on goods and services originating in a given country, plus net factor income from the rest of the world. Economic and political life revolves around the GNP.