Answer to Question #282571 in Macroeconomics for Abdirahim

Question

Briefly explain the meaning of gross domestic product (GDP) and gross national product

(GNP). Decide and explain either GDP or GNP is better to measure the economic

performance of the country.

Answer 1

The main difference between GDP and GNP is that GNP considers the output of a country’s citizens regardless of where that economic activity occurred. GDP considers the activity within a national economy regardless of the residency of productiont In the following situations, when GDP and GNP treat quite differently—the way they treat these situations forms the core of their difference from one another.The net income receipts of foreign companies owned by foreign residents that produce goods in the country under study. Since GNP only considers citizens of a country and their economic output, it does not include such companies in its measurement. However, GDP measures economic output regardless of country of residence and its include such companies in its measurement.