KEY TAKEAWAYS
- The gross domestic product takes into account all goods and services produced on the territory of a state by nationals and foreigners. Gross national product, on the other hand, takes into account all goods and services produced by nationals worldwide.
- Among the major economies, gross domestic product differs only slightly from gross national product.
Both gross domestic product and gross national product (also known as gross national income) are a measure of economic activity. Gross domestic product (GDP) represents the total value of all goods and services generated by a country within one year. The calculation also takes into account all goods and services provided by foreigners, as long as it was generated within the country’s borders.
Gross national product (GNP), on the other hand, does not take into account the activities of foreigners, but does take into account all foreign activities generated by nationals. The German gross national product, for example, takes into account all income generated by German citizens, regardless of whether the income was generated in Germany or abroad. The gross domestic product, on the other hand, takes into account all income generated in Germany, i.e. by all German citizens as well as by foreigners, but not the income generated by German citizens abroad. Among the major economies, however, the difference between gross domestic product and gross national product is only marginal nowadays due to globalization.
Example
As an example, French people who travel to work in Germany every day but live in France and are citizens of France can be considered. After calculating the gross domestic product, the values generated by them are included in the gross domestic product of Germany. This is because the values were created in Germany. However, if one calculates the gross national income, the values generated by the French people working in Germany on a daily basis are not included. This is because the French are not nationals, but foreigners.