Question

What is the difference between GDP and GNP? Is one is better measure of income/output than the other? Why?

Answer 1

GDP is the value of the total amount of services rendered and the total products produced in an economy within the boundaries of that nation at a certain time by its citizens. In contrast, the GNP is the value of all the services rendered and total products produced by nationals of a that particular nation regardless of where they are located in the globe.

Gross domestic product is a better tool that can be used as a measure of income or product as compared to gross national product. This is because GDP is the most reliable indicator used to measure the overall economic growth of a country. GDP is better as it gives an idea of whether a country’s economy is contracting or growing. It is also a good measure of comparing two countries in terms of their levels of development.