If you are a person who regularly follows news programs and economic news, surely you will often hear the terms GNP or GDP, right? However, have you ever wondered what is GNP, what is the relationship between GDP and GNP that is often mentioned together? If yes, do not miss the interesting information in the article below to get detailed answers to questions about GNP!
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What is GNP?
GNP – Gross National Product or Gross National Product, is an economic indicator used to assess the economic development of a country. GNP is calculated as the total monetary value of final products and services produced by the citizens of a country during a given period of time, usually a financial year, and regardless of where they are produced (including both at home and abroad).
In which, final products are goods that are finally consumed by consumers, not those that are used as intermediates in the production of other products. For example, a motorcycle sold to a consumer is considered the final product, while components such as tires and tubes sold to a motorcycle manufacturer are considered intermediate products. However, if the same tire is sold to consumers, it is considered the final product. Only the final product is included in GNP (gross national product), including intermediate products, leading to a double calculation that increases the real value of national income. In the case of the tire, its value was calculated when it was sold by the tire manufacturer to the motorcycle manufacturer and then again added to the motorcycle’s value when the vehicle manufacturer machine sold to consumers.
Formula for calculating GNP
The Gross National Product Index (GNP) of a country for a year is calculated as follows: GNP = (X – M) + NR + C + I + G
- X is an index of net exports of goods and services.
- M is the output index of net imports of goods and services.
- NR is net income from overseas assets (net income).
- C is the personal consumption expenditure index.
- I is the total domestic private investment.
- G is the consumer cost index of the state.
Difference between GDP and GNP
When putting on the “balance” comparing GDP with GNP is indeed not easy. Because both these concepts are similar, if you don’t read carefully, it is difficult to recognize the differences. First need to “score” through their concept.
To understand what is the relationship between GDP and GNP, first you need to understand what GDP is?
GDP stands for Gross Domestic Product when translated into Filipinos it means Gross Domestic Product or Gross Domestic Product. GDP is the total value of all goods, products, services… of a certain country achieved within 1 year. The higher the GDP, the stronger the economy of that country and vice versa.
Meanwhile, the above concept of GNP we have stated is:
GNP stands for Gross National Product when translated into Filipinos this phrase means: “Gross National Product” or “Gross National Product” – refers to the total value in money obtained from products and services. the last service produced by all citizens of a country in a year. GNP measures the economic development of a country.
From here, we give 5 similarities between GDP and GNP as above for readers to have an overview before comparing GDP with GNP:
These are all standard concepts, used worldwide
- Both are used in the field of macroeconomics
- It is an indicator of the economic development of a country
- All are calculated based on definite formulas
- Both are the final numbers of a country/year
Here is the difference between them:
Differences in calculation formula
- The formula for calculating GDP is total consumption: GDP = C + I + G + NX
- The formula for calculating GNP is gross national product: GNP = C + I + G + (X – M) + NR
- C = Personal consumption expenses
- I = Total personal investment
- G = Government expenses
- NX = “net exports” of the economy
- X = Exports of goods and services
- M = Import turnover of goods and services
- NR= Net income from goods and services invested abroad (net income)
Different in nature
- GDP is Gross Domestic Product or Gross Domestic Product
- GNP is Gross National Product or Gross National Product
From here we see that GNP has a broader meaning than GDP because GNP includes Gross National Product, which means including revenue from outside the country, its territory and GDP only in the territory. To make it easier to imagine, we quote a real-life example.
For example: Suppose a Filipinos citizen goes to Japan (Korea, Taiwan or any other country,…) to work for a period of time, the income that this person earns in Japan will be included in the calculation. Japan’s GDP because this money is made in Japan. However, this income is not included in Japan’s GNP because this person is not a Japanese citizen.c. However, the profit Apple makes after deducting all expenses is counted as part of the US GNP.
From the above example shows. GNP is created in all countries and territories that are obtained by citizens and businesses of that country.