Gross National Product (GNP) is an economic indicator which is the evaluation of a country's economic vigor or in other words, we can say that GNP is termed as whatever commodities are produced and services offered by the general public of a country within its boundaries. GNP is computed as the sum value of all the commodities and services produced by the economic activity of a nation. This calculation is done for a particular time period, usually one year. It is worked out before making any sort of depreciation allowance or utilization of capital which is employed during the course of production. It is differentiated from net national product as the latter is calculated after making such an allowance.
Gross National Product is calculated by adding the GDP with any earnings of its inhabitants from overseas investments and then subtracting the amount earned inside the domestic financial system by its residents in the foreign countries.
Gross National Product and the Gross Domestic Product are similar terms however, the revenue building up to a nation’s populace from investments abroad are not included in Gross National Product. Gross National Product is a suitable economic indicator of the intensity of a nation’s economic movement. Till 1991, The United States of America was using GNP as its main gauge of economic output, which then was substituted by GDP.
United States changed GNP with GDP as its main gauge of economic activity because of various limitations of the GNP. Since unpaid economic activity including domestic work like child care is excluded from the calculation of GNP, thus a distortion is experienced. Once exchange rates are shifted from one country to another, the comparison of GNP of both countries turns out to be inaccurate. Also the effect of monetary action on environment is not calculated and is completely ignored in GNP. The factors affecting the life quality are also not catered for or calculated in it.
