No two economic indicators are more important to a nation’s economy than gross national product (GNP) and national income. While both measures track the country’s economic output, they use different methodologies and come up with different numbers. It can be confusing to know which one to trust, so let’s take a closer look at the differences between GNP and national income.
What is GNP?
GNP is the total value of all final goods and services produced in a country in a given year, plus any income earned from abroad, minus any income earned by foreigners in the country. GNP is one measure of a country’s overall economic performance.
- GNP per capita is a more useful measure of a country’s standard of living. GNP growth is another important economic indicator. GNP data are used to help assess a country’s economic health and to forecast future economic activity.
- GNP data can also be used to compare the relative sizes of different economies or to compare the standard of living in different countries. GNP is not the same as Gross Domestic Product (GDP), which is the total value of all goods and services produced within a country’s borders in a given year.
- GNP includes GDP, but it also includes other income, such as interest and dividends earned on investments made abroad. GNP can be measured in several ways, including nominal GNP (or GNP at current prices) and real GNP (or GNP at constant prices).
- Nominal GNP measures the value of all goods and services produced in a country in a given year at current prices. Real GNP measures the value of all goods and services produced in a country in a given year at constant prices.
Constant-price GNP data are adjusted for inflation, so they provide a better measure of changes in the level of output than nominal GNP data. GNP data are widely used by government officials, business leaders, economists, and others to assess the health of an economy and to make decisions about economic policy.
What is National Income?
National Income is the money value of all the final goods and services produced in an economy during one year. It includes both the gross domestic product (GDP) and the net income from abroad. National Income is also sometimes called National Output. The National Income accounts are used to measure the performance of an economy and to inform economic policy. They provide information on how much income is generated, how it is distributed, and how it is used. The National Income accounts are also a key source of data for macroeconomic models.
Difference between GNP and National Income
GNP and National Income GNP, or gross national product, is the total value of all final goods and services produced within a country in a given year. GNP includes all production by citizens of the country, even if they are living overseas.
- GNP is often used as a measure of a country’s standard of living. National income, on the other hand, is the total value of all final goods and services produced within a country’s borders in a given year.
- National income does not include production by citizens living overseas. GNP is usually greater than national income because GNP includes production by citizens living overseas, while national income does not.
- GNP is a better measure of a country’s standard of living than national income because GNP includes all production by citizens of the country, regardless of where they are living.
Conclusion
GNP and national income are two different measures of a country’s economic well-being. Gross National Product looks at the total value of all goods and services produced by citizens of a country, regardless of where they are located. National Income, on the other hand, only includes income generated within the borders of a country. It’s important to understand these differences when looking at data about a country’s economy.
