Question

Are GDP and GNP really relevant as economic indicators? Why? What is the
difference between GDP and GNP? Please explain whether the difference is important
for the Turkish economy.

Answer 1

Yes GDP and GNP are relevant as economic indicators.They are mostly used ways to measure the economic output of the country at aggregate level.

GDP represents the value of finished or completed goods and services produced in a fixed period in a particular country.It gives the picture of economic position of the country indicating about the rate of economic growth and economic size.

GNP represent the value of final or completed goods and services produced in a fixed period with the help of factors of production that the residents of the country own.

GDP and GNP are different concepts.

1) GDP is the worth of nation's domestically produced finished products and services in a fixed time period whereas GNP is the worth of finished products and services which are owned by the residents of the country within a time period.

2) GDP is limited to the country's geographical boundary whereas GNP includes the foreign economic actions done by their nationals.

3) GDP is the indicator of economy at local or national level whereas GNP indicates how their nationals are working for the economy of their country.

4) GDP is related to national income , output and expenditure done in a specific country whereas GNP is addition of net property income (interest, dividend and profit) from foreign to GDP.

The difference between GDP and GNP is important for Turkish economy because their lot of citizens are working foreign and the when they sent remittances to their homes, it is to be considered as part of GNP of country and not GDP of the country so they must know the difference between two.