WHAT IS GROSS NATIONAL PRODUCT (GNP)

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Gross National Product (GNP) is the total market value of all goods and services produced by factors of production of a country, regardless of its location.

Stated differently, GNP is the total market value of all goods and services produced by the citizens of a country, both domestically and abroad.

GNP shows how much a country's nationals have contributed to the country's economy, irrespective of their location.

It includes all income earned by a country's citizens and subtract income that foreign citizens earned in our country.

Gross National Product (GNP) can be computed by adding Net Foreign Factor Income (NFFI) to GDP. Net foreign is the difference between the income a country's citizens earned abroad and the income that foreigners earned in our country. 

To Nigeria, Net foreign factor income is the income Nigerians earned abroad minus the income non-Nigeria residents earned in our country. Net foreign factor income (NFFI) is also called Net foreign income from abroad (NFIA) . NFFI is always the difference between Gross National Product (GNP) and Gross Domestic Product (GNP).

GNP, as i told you previously, is the sum of GDP and Net foreign factor income. Expressing this symbolically, we have.

$GNP=GDP+NFFI$

Since $GDP=C+I+G+(X-M)$, we can expand GNP to mean:

$GNP=C+I+G+(X-M)+NFFI$

         Where C is consumption

                     I am Investment 

                     G is Government spending

                     $X-M$ is Net exports

Example

In 2007, Germany GDP was €2,422.9 billion, income of Germans citizens generated abroad amount to 239.3 billion, income that foreigners earned in Germany is 198.0 billion, From this information, let's calculate Germany's GNP.

Solution:

GNP is the sum of GDP plus NFFI. We can obtain NFFI by subtracting income that non-German residents earned in Germany from income that Germans earned abroad. 

So, $NFFI=239.3-198.0=41.3$

Hence,

$GNP=2442.9+41.3$

$GNP=2464.2$

Therefore, Germany's GNP for 2007 is 2464.2 billion

DIFFERENCES BETWEEN GDP VS GNP

GDP is the market value of all final goods and services produced within a country, regardless of who produced them. GNP, on the other hand, is the market value of all final goods and services produced by a country's citizens, irrespective of where it was produced.

To better understand this distinction, let take an example of a Senegalese footballer plying his trade in the USA.

His weekly pay will be excluded from the USA's GNP because he is not a national. However, his weekly pay will be included in the USA's GDP because his income was earned in the USA.

As another example, Let consider the Volvo car company located in the US. As a Swedish company, every profit Volvo make in the US is not counted in US GNP but included in Sweden GNP.

However, Volvo's profit will be included in US GDP because they were produced in the US. Using the same logic, Volvo's profit will be excluded from Sweden's GDP because it wasn't produced there.

Because the distinction between GDP and GNP is important, let summarize what we have been discussing into just one phrase: "GDP is total output produced within a country (say, Nigeria) while GNP is the total output produced by a country citizens (Nigerians)".

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RELATIONSHIP BETWEEN GDP AND GNP.

GNP, as I have always emphasized, in this post, is the sum of GDP and NFFI.

So, the relationship between GDP and GNP is such that:

1. When Net foreign factor income (NFFI) is positive or greater than zero, GNP is greater than GDP.

2. When Net foreign factor income (NFFI) is negative or lesser than zero, GNP is lesser than GDP.

3. When Net foreign factor income (NFFI) is zero, GNP equals GDP.

That will be all for now. If you have got questions relating to this post, do well to ask me in the comment box. Alternatively, you cam also ask our telegram community.

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