The difference between GDP and GNP lies in the fact that GDP represents the market value of all goods and services produced within a country, while GNP represents the value of goods and services produced by a country's residents regardless of their location. When evaluating these measures to determine economic health, it is evident that GDP holds greater significance as it reflects national output or income. If a nation's GDP surpasses its GNP, it indicates a significant presence of foreign-owned businesses contributing to the domestic economy.
The per capita income is often called GDP divided by population. The equation commonly used to calculate GDP is GDP = Consumption + Government Expenditures + Investment + Exports – Imports. A recession is defined as a d
...ecrease in GDP for two consecutive quarters or more. Conversely, if GDP grows too fast and inflation becomes a concern, it signals an expansion in the economy. Thus, GDP serves as a better indicator of economic health.
In general, GNP is higher than GDP because it includes total domestic production (GDP) plus production outside the country. GNP is the sum of domestic production and domestically-owned foreign production. If GDP exceeds GNP, it means there must be negative foreign production.
For example, if a catastrophic earthquake destroys foreign factories causing significant financial losses, negative foreign production can occur and result in GDP being greater than GNP. However, it is highly unlikely for a country's GDP to surpass its GNP.
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