Question

Compare and contrast GDP and GNP. Give an example of something that would be counted in U.S. GDP but not in U.S. GNP. Then give an example of something that would be counted in U.S. GNP but not in U.S. GDP.

Answer 1

GDP is the sum of market value of goods and services produced within the domestic territory of a country during an accounting year. GNP is the market value of goods and services produced in the domestic territory plus the difference between the property income received by the domestic nationals from the rest of the world and property income paid to the foreign nationals in the form of dividend interest and profit. For example if a Japan multinational company produce car in U. S this production is counted in the valuation of GDP in U.S. But if the Japan Company sends a part of profit to the shareholders in Japan, this amount is subtracted from GNP but not in GDP. On the other, if a U.S firm produces car in Japan and the firm send a part of profit to the shareholders in U.S this amount is added to the GNP of U.S but not in GDP.

For example U.S GDP include the value of car manufacture by Toyota (Japan owned company) operating in U.S. But GNP does not include.

GNP includes the value of Car manufactured by General Motors in Japan but it is not included in GDP of U.S.