The essence of GDP and GNP indicators

In the modern world, even a simple schoolchild that is not connected with the economy will still hear different financial terms, macro and microeconomic indicators, down to accounting with taxation. To connect the popularity of terminology with science so necessary for the society can be with various circumstances. However, few will disagree with the fact that living conditions in a market economy encourage people to keep pace with information flows. Such a way of life helps people to maintain their personal competitiveness as a labor resource, increase financial awareness with the aim of accumulating capital, provide the necessary level of tax literacy for the elementary survival of both private entrepreneurs and ordinary taxpayers, especially in our country. And such terms of economic science as GDP and GNP, in turn, are the most important macroeconomic indicators, which every member of modern society accurately hears daily. They determine the level of development of each country, the wealth of its citizens, the role in the world political arena, the possibility of influencing certain events in the sector affecting it, and many other indicators.

Although these two concepts are almost equally important for the economy of any state, they have precise economic definitions, which generalize all the above-mentioned importance. So what is GDP and GNP?

The gross domestic product (GDP) is the total volume of output (in terms of price) produced by economic entities within the state, regardless of their residence.

The gross national product (GNP) is the aggregate volume of material goods produced by the subjects of the economy of the state, regardless of their location - inside or outside the country.

Thus, the difference between GDP and GNP is the difference between the aggregate value of material goods produced domestically and by non-residents of the state and the value of goods produced outside it, but only by the residents of the country. That is, the value indicator of all the cumulative output produced within Russia and recounted by the relevant organizations, regardless of who owns factories and factories for its production, will be called GDP. The products produced by Russian plants and factories, regardless of the country where it was made, are GNP. In addition, even though GDP and GNP are concepts that often appear together in the information flow of modern society, they are not interchangeable indicators. In fact, their joint use is carried out with a comparative purpose, to determine the difference between the quantities. With the help of the established balance of GDP and GNP indicators, economists are given an opportunity to analyze the current situation in the state, to identify the causes of various events affecting the economy of the country, and to determine the instruments of influence to improve its situation.

Also, GDP and GNP include not only products that enhance the welfare of society, but also those that are aimed at restoring consumed goods or products that have suffered wear and tear. Nevertheless, the growth of these indicators is usually compared with the growth of the welfare of society. Although equating such data in many cases may be incorrect.