Gross national product (GNP)

Let's begin with a fundamental concept. When discussing a country's total economic output, one can consider not only what is produced within its borders, but also what its citizens earn from abroad. Gross national product or GMP addresses this issue. Unlike gross domestic product, which measures all goods and services produced within a country's borders, GNP captures total output by citizens and businesses, regardless of location. GMP includes income earned by nationals abroad and excludes income generated by foreigners within the country, helping us evaluate the worldwide economic activities tied to a nation's people and companies. To see how GMP is derived, let us compare it to GDP. We start with GDP as the base. This is all output within the country. Then to reach GMP, we add net factor income from abroad. Net factor income is the difference between income that nationals earn overseas and income that foreigners earn within the country. For example, if a British company owns a factory in India, the profits from that factory contribute to the United Kingdom's GMP, not its GDP. Conversely, if an American company earns significant income in China, those profits are counted in the United States GNP. This adjustment reflects the fact that citizens wealth creation is not confined to national borders. Comparing GMP with measures like GDP, gross national income, GNI, and net national product NMP highlights important distinctions.