The total value of all goods and services produced by a country’s residents and businesses Show Gross National Product (GNP) is a measure of the value of all goods and services produced by a country’s residents and businesses. It estimates the value of the final products and services manufactured by a country’s residents, regardless of the production location.  GNP is calculated by adding personal consumption expenditures, government expenditures, private domestic investments, net exports, and all income earned by residents in foreign countries, minus the income earned by foreign residents within the domestic economy. The net exports are calculated by subtracting the value of imports from the value of the country’s exports. Unlike Gross Domestic Product (GDP), which takes the value of goods and services based on the geographical location of production, Gross National Product estimates the value of goods and services based on the location of ownership. It is equal to the value of a country’s GDP plus any income earned by the residents in foreign investments, minus the income earned inside the country by foreign residents. GNP excludes the value of any intermediary goods to eliminate the chances of double counting since these entries are included in the value of the final products and services. How to Calculate the Gross National Product?The official formula for calculating GNP is as follows: Y = C + I + G + X + ZWhere:
Alternatively, the Gross National Product can also be calculated as follows: GNP = GDP + Net Income Inflow from Overseas – Net Income Outflow to Foreign CountriesWhere: GDP = Consumption + Investment + Government Expenditure + Exports – ImportsGross National Product takes into account the manufacturing of tangible goods such as vehicles, agricultural products, machinery, etc., as well as the provision of services like healthcare, business consultancy, and education. GNP also includes taxes and depreciation. The cost of services used in producing goods is not computed independently since it is included in the cost of finished products. For year to year comparisons, Gross National Product needs to be adjusted for inflation to produce real GNP. Also, for country to country comparisons, GNP is stated on a per capita basis. In computing GNP, there are complications on how to account for dual citizenship. If a producer or manufacturer holds citizenship in two countries, both countries will take into account his productive output, and this will result in double counting. Importance of GNPPolicymakers rely on Gross National Product as one of the important economic indicators. GNP produces crucial information on manufacturing, savings, investments, employment, production outputs of major companies, and other economic variables. Policymakers use this information in preparing policy papers that legislators use to make laws. Economists rely on the GNP data to solve national problems such as inflation and poverty. When calculating the amount of income earned by a country’s residents regardless of their location, GNP becomes a more reliable indicator than GDP. In the globalized economy, individuals enjoy many opportunities to earn an income, both from domestic and foreign sources. When measuring such broad data, GNP provides information that other productivity measures do not include. If residents of a country were limited to domestic sources of income, GNP would be equal to GDP, and it would be less valuable to the government and policymakers. The information provided by GNP also helps in analyzing the balance of payments. The balance of payments is determined by the difference between a country’s exports to foreign countries and the value of the products and services imported. A balance of payments deficit means that the country imports more goods and services than the value of exports. A balance of payments surplus means that the value of the country’s exports is higher than the imports. GNP vs. GDPBoth the Gross National Product (GNP) and Gross Domestic Product (GDP) measure the market value of products and services produced in the economy. The terms differ in what constitutes an economy since GDP measures the domestic levels of production while GNP measures the level of the output of a country’s residents regardless of their location. The difference comes from the fact that there may be many domestic companies that produce goods for the rest of the world, and there may be foreign-owned companies that produce products within the country. 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. For example, the GNP of the United States is $250 billion higher than its GDP due to the high number of production activities by U.S. citizens in overseas countries. Most countries around the world use GDP to measure economic activity in their country. The U.S. used Gross National Product as the primary measure of economic activity until 1991 when it adopted GDP. When making the changes, the Bureau of Economic Analysis (BEA) observed that GDP was a more convenient economic indicator of the total economic activity in the United States. The GNP is a useful economic indicator, especially when measuring a country’s income from international trade. Both economic indicators should be considered when valuing a country’s economic net worth to get an accurate position of the economy. Gross National Income (GNI)Instead of Gross National Product, Gross National Income (GNI) is used by large institutions such as the European Union (EU), The World Bank, and the Human Development Index (HDI). It is defined as GDP plus net income from abroad, plus net taxes and subsidies receivable from abroad. GNI measures the income received by a country’s residents from domestic and foreign trade. Although both GNI and GNP are similar in purpose, GNI is considered a better measure of income than production. Related ReadingsThank you for reading CFI’s guide to Gross National Product. To keep learning and advancing your career, the following CFI resources will be helpful:
The gross national income (GNI), previously known as gross national product (GNP), is the total domestic and foreign output claimed by residents of a country, consisting of gross domestic product (GDP), plus factor incomes earned by foreign residents, minus income earned in the domestic economy by nonresidents.[2]: 44 Comparing GNI to GDP shows the degree to which a nation's GDP represents domestic or international activity. GNI has gradually replaced GNP in international statistics.[3][4] While being conceptually identical, it is calculated differently.[5] GNI is the basis of calculation of the largest part of contributions to the budget of the European Union.[6] In February 2017, Ireland's GDP became so distorted from the base erosion and profit shifting ("BEPS") tax planning tools of U.S. multinationals, that the Central Bank of Ireland replaced Irish GDP with a new metric, Irish Modified GNI (or "GNI*"). In 2017, Irish GDP was 162% of Irish Modified GNI.[7] Comparison of GNI and GDP
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{\displaystyle \mathrm {GNI} =\mathrm {GDP} +{\text{Money flowing from foreign countries}}-{\text{Money flowing to foreign countries}}}
GNI (Atlas method) nominalNominal, Atlas method – millions of current US$ (top 15)[3]
GNI (Atlas method) PPPPPP – millions of international dollars (top 15)[4]
Gross national productGross national product (GNP) is the market value of all the goods and services produced in one year by labor and property supplied by the citizens of a country. Unlike gross domestic product (GDP), which defines production based on the geographical location of production, GNP indicates allocated production based on location of ownership. In fact it calculates income by the location of ownership and residence, and so its name is also the less ambiguous gross national income. GNP is an economic statistic that is equal to GDP plus any income earned by residents from overseas investments minus income earned within the domestic economy by overseas residents. GNP does not distinguish between qualitative improvements in the state of the technical arts (e.g., increasing computer processing speeds), and quantitative increases in goods (e.g., number of computers produced), and considers both to be forms of "economic growth".[11] When a country's capital or labour resources are employed outside its borders, or when a foreign firm is operating in its territory, GDP and GNP can produce different measures of total output. In 2009 for instance, the United States estimated its GDP at $14.119 trillion, and its GNP at $14.265 trillion.[12] The term gross national income (GNI) has gradually replaced the Gross national product (GNP) in international statistics.[3][4] While being conceptually identical, the precise calculation method has evolved at the same time as the name change.[5] Use of GNPThe United States used GNP as its primary measure of total economic activity until 1991, when it began to use GDP.[13] In making the switch, the Bureau of Economic Analysis (BEA) noted both that GDP provided an easier comparison of other measures of economic activity in the United States and that "virtually all other countries have already adopted GDP as their primary measure of production".[14] Many economists have questioned how meaningful GNP or GDP is as a measure of a nation's economic well-being, as it does not count most unpaid work and counts much economic activity that is unproductive or actually destructive.[15] GNI vs GDPWhile GDP measures the market value of all final goods and services produced in a given country, GNI measures income generated by the country's citizens, regardless of the geographic location of the income. In many states, those two figures are close, as the difference between income received by the country versus payments made to the rest of the world is not significant. According to the World Bank, the GNI of the US in 2016 was 1.5% higher than GDP.[16] In developing countries, on the other hand, the difference might be significant due to a large amount of foreign aid and capital inflow. In 2016, the GNI[17] of Armenia was 4.45% higher than GDP.[18] Based on the OECD reports, in 2015 alone, Armenia has received a total of US$409 million development assistance. Over the past 25 years, USAID has provided more than one billion USD to improve the living of the people in Armenia. GNI equals GDP plus wages, salaries, and property income of the country's residents earned abroad that also constitutes the higher GNI figure. According to the UN report on migration from Armenia in 2015-17, every year around 15-20 thousand people leave Armenia permanently,[19] and roughly 47% of those are working migrants that leave the country to earn income and sustain the families left in Armenia. In 2016 Armenian residents received in a total of around $150 million remittances.[20] See also
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