Considering just the U.S., GDP (Gross Domestic Product) and GNP (Gross National Product) are closely related but differ mainly in terms of the location of production versus the nationality of producers:
- GDP measures the total value of goods and services produced within the U.S. borders , regardless of who produces them (whether U.S. citizens or foreign residents/companies operating in the U.S.)
- GNP measures the total value of goods and services produced by U.S. residents and businesses , no matter where in the world they are located. It adds income earned by U.S. citizens and companies abroad and subtracts income earned by foreign residents and companies within the U.S.
In formula terms, for the U.S.:
GDP=GNP−output of U.S. citizens living abroad+output of foreign nationals living in the U.S.\text{GDP}=\text{GNP}-\text{output of U.S. citizens living abroad}+\text{output of foreign nationals living in the U.S.}GDP=GNP−output of U.S. citizens living abroad+output of foreign nationals living in the U.S.
or equivalently,
GNP=GDP+net income from abroad (income earned by U.S. residents abroad minus income earned by foreigners in the U.S.)\text{GNP}=\text{GDP}+\text{net income from abroad (income earned by U.S. residents abroad minus income earned by foreigners in the U.S.)}GNP=GDP+net income from abroad (income earned by U.S. residents abroad minus income earned by foreigners in the U.S.)
Because many American businesses operate globally and earn income overseas, the U.S. GNP is typically slightly higher than its GDP. For example, in 2023, the U.S. GDP was about $27.36 trillion, while the GNP was about $27.53 trillion
. Historically, the U.S. used GNP as its main economic measure until 1991, when it switched to GDP because GDP better reflects economic activity within the country and aligns with other U.S. economic data, as well as facilitating international comparisons
. The difference between GDP and GNP for the U.S. tends to be small because net income flows from abroad are roughly balanced, but GNP includes the net income Americans earn from investments and businesses overseas, which can make it slightly larger than GDP
. In summary:
- GDP focuses on where production occurs (inside U.S. borders).
- GNP focuses on who produces (U.S. residents/citizens, regardless of location).
- For the U.S., GNP is usually slightly higher than GDP due to positive net income from abroad.
This relationship highlights how U.S. economic output is influenced by both domestic production and international economic activities of its residents and businesses
