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Distinguish between gross domestic product(GDP) at market price and gross national product(GNP) at factor cost. |
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Answer» GDP (Gross Domestic Product) is a commonly used calculator of national income and measures the economic activity in a country. Essentially, the GDP is a figure which measures the value of the goods and services produced in a country in a given time period (usually one year). GDP = Private Consumption + Gross Investment + Government Investment + Government Spending + (Exports – Imports) GNP (Gross National Product) is also a calculator of economic activity. However, GNP also encompasses the value of net income made abroad. Moreover, when calculating GNP, the value of what foreign countries earn in the given country is subtracted from the value. GNP = GDP + (Net income earned by domestic residents/businesses from overseas investments) – (Net income earned by foreign residents/businesses from domestic investments) |
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