What Is the Difference Between GDP and GNP?

GDP (gross domestic product) and GNP (gross national product) are statistical indicators currently used internationally to measure the level of national macroeconomic development. Among them, GDP refers to the total value of all production factors, including labor, capital, and resources, in a country's territory, and the value of the final products and services produced and sold within a certain period of time. It includes the investment of domestic enterprises in the country The output brought by it, and the output brought by foreign companies' investment in host countries (ie, FDI); GNP refers to the final products and services produced and sold by a country's nationals for a certain period of time The sum of values, it only includes the output of nationals (enterprises and individuals) from domestic and foreign investment, and does not include the output of foreigners' investment in the country.

How is GDP different from GNP

Right!

GDP (gross domestic product) and GNP (gross national product) are statistical indicators currently used internationally to measure the level of national macroeconomic development. Among them, GDP refers to the total value of all production factors in a country, including labor, capital, and resources. The value of the final products and services produced and sold within a certain period of time. It includes the investment of domestic enterprises in the country. The output brought by it, as well as the output brought by foreign companies' investment in the host country (ie, FDI); GNP refers to the final products and services produced by a country's nationals and produced and sold within a certain period of time. The sum of values, it only includes the output of nationals (enterprises and individuals) from domestic and foreign investment, and does not include the output of foreigners' investment in the country.

Fundamentally, there is no essential difference between the two. They are both a measure of a country's output level over a certain period of time. However, from the meaning of GDP and GNP, we can still see that the difference between them is mainly reflected in the former is based on the principle of territoriality to measure a country's wealth, while the latter is based on the principle of personality.

In general, when a country is in a development stage where capital inflows are greater than outflows, its GDP will be greater than GNP; conversely, when a country is in a stage where capital outflows are greater than inflows, GDP will be less than GNP. In terms of the current direction of major capital flows in the world, developed countries in Europe, America, and Japan are the main net capital inflow countries, while developing countries are the main net capital inflow countries. This means that for most developing countries, the output level calculated by GDP is greater than the output level calculated by GNP. But does this indicate that the output level of developing countries calculated from GDP cannot truly reflect the actual output efficiency of the country?

In fact, compared with GNP, the statistical indicators of GDP can truly reflect the production efficiency and competitiveness of a country's economic development. As mentioned above, GDP is an output indicator determined by the principle of territoriality, that is, all output counted by GDP must be attached to a country's territory. This means that the realization of any outputwhether brought by the production investment of domestic residents or by the production investment of foreign residentsmust be combined with various elements of this country, including this country Labor, land, resources, markets, and institutions in order to promote the development and progress of the country in political, economic, social, cultural and other aspects.

Compared with GNP, GDP mainly reflects the quality and efficiency of a country's economic development in the following aspects:

First, compared with GNP, the size of GDP reflects the ability of a country's economy to absorb capital. To convert capital input into effective maximum output, a country must have a considerable foundation in software and hardware. Specifically, hardware includes the construction of various infrastructures, the training of talents, and the accumulation of consumer power; software includes the improvement of social and cultural systems, the completion of market mechanisms, the transformation of consumer awareness, and the establishment of product brands. So whether it is derived from domestic own capital or foreign direct investment, GDP growth is closely related to the investment environment of a country. Only a good investment environment can bring about constant growth in GDP.

Secondly, compared with GNP, the quality of GDP reflects the optimal allocation of various factors of production resources in a country. The comparison of factor endowment advantages is the basis of current global capital flow allocation. Capital can produce maximum output only when it is combined with the country's superior resources. At a certain stage of development, a large amount of foreign capital is introduced and combined with the country's advantageous resources, which can undoubtedly greatly improve the efficiency of the use of domestic resources, including solving employment, promoting technological progress, improving management capabilities, and reducing resource and energy consumption. Therefore, the effective growth of GDP can more objectively reflect the utilization degree and utilization efficiency of various factor resources in the country.

Finally, compared to GNP, the structure of GDP reflects the true social welfare level of a country. Generally speaking, after a country's economic development reaches a certain stage, people will place higher demands on the welfare of the ecological environment, social security, fairness and justice, etc. This will promote the gradual change of the economic focus from "things" to "people". Promote the gradual transformation of the industrial structure from manufacturing-oriented to service-oriented. How to better improve the living environment of the people, provide more public goods, improve the level of social security, and achieve fair social development, etc., will become the top priority of economic development. These can only be achieved by further optimizing the structure of GDP, including reduction of energy consumption per unit of GDP, adjustment of industrial structure, and construction of redistribution mechanisms. The reasonable change of GDP structure will undoubtedly promote the coordinated development of the country's population resources and environment, so as to achieve the goal of sustainable development.