How It Works
GNP includes income earned by citizens and companies abroad, but does not include income earned by foreigners within the country.
The figures used to assess GNP include the manufacturing of tangible goods (cars, furniture and agricultural products) and the provision of services (education, healthcare, and business services). GNP does not include the services used to produce manufactured goods because their value is included in the price of the finished product. However, GNP does include depreciation and indirect business taxes like sales tax.
The formula for GNP is:
Consumption + Government Expenditures + Investments + Exports + Foreign Production by U.S. Companies – Domestic Production by Foreign Companies = Gross National Product
GNP can be adjusted to make valid comparisons year-to-year or among countries. For year-to-year comparisons, GNP needs to be adjusted for inflation. For country-to-country comparisons, GNP needs to be stated on a per capita basis (i.e. GNP divided by the population of the country).
The difference between GNP and gross domestic product (GDP) is that GNP includes the value of products made by a country's citizens and companies abroad, while GDP only accounts for products made within a country's borders. However, GNP excludes the value of products made by foreign companies within the reporting country.
