Answer to Question #304183 in Macroeconomics for Habron

Question

Explain the fallacies of the following statement GNP is always greater than GDP

Answer 1

In the field of economics investors are more concerned with GDP than with GNP because it provides a more accurate illustration a nation's total economic activity regardless of country of origin and hence offers a better indicator of an economy's overall health status.

GNP usually measures the value of goods and services produced by only a country's citizens but both domestically and from abroad whereas GDP measures the value of goods and services produced within a country's borders by citizens and non citizens too. Therefore, if the income earned by domestic firms in overseas countries exceeds the income earned by foreign firms within the country, GNP is higher than the GDP.