Gross National Product (Gnp)

Published Oct 25, 2023

Definition of Gross National Product (GNP)

Gross National Product (GNP) is a measure of the total economic output generated by all residents and businesses of a country, regardless of where they are located. It includes the value of goods and services produced by a country’s residents both domestically and abroad within a specific time period (usually a year). GNP is often used as an indicator of a country’s economic performance and overall economic health.

Example

To better understand GNP, let’s use the example of a multinational company. Let’s say Company XYZ is headquartered in Country A but has subsidiaries and operations in Country B and Country C. Company XYZ’s headquarters in Country A, along with its subsidiaries in Countries B and C, contribute to the overall GNP of Country A, as they are all part of the country’s economic activity.

Furthermore, if a citizen of Country A is working abroad in Country D and sending money back to their home country, these remittances would also be included in Country A’s GNP because they are generated by one of its residents.

On the other hand, if a foreign company operates within Country A’s borders and generates economic output, that output would not be included in Country A’s GNP since it is not generated by a resident or business of the country.

Why Gross National Product (GNP) Matters

GNP is an important measure because it provides insight into the overall economic activity and productivity of a country, including both domestic and international contributions. It allows policymakers, economists, and investors to analyze and compare countries’ economic performance, track trends over time, and make informed decisions. GNP can also be used to assess a country’s standard of living, income distribution, and economic growth. However, it’s important to note that GNP does not take into account factors such as environmental sustainability, quality of life, or social well-being, which are also crucial considerations for policymakers and society as a whole.