In economics, the term gross national product (GNP) denotes the value of a country’s total economic activity – both within its borders and internationally. It is also referred to as gross social product (GSP).
A country's GNP is calculated by adding the income and capital gains of all employees and companies domiciled in that country. In contrast to gross domestic product (GDP), which only measures the value of economic activity within a country’s borders, GNP does not account for where the income was generated. The only relevant factor is whether the person or company who earned the income has its primary domicile in the country in question.
GNP indicates the total worldwide economic activity of a country’s residents, in contrast to GDP, which only indicates local economic activity (regardless of where the people or companies involved are domiciled).
A small country with a small population may have a very low GDP because a relatively low number of trades are transacted within the country. However, that country may have a very high GNP because its citizens and resident companies make large volumes of commercial transactions outside of the country.
GNP can be used to measure a country's affluence. The higher the GNP is in relation to the population, the more affluent a country is. Switzerland is one of the countries with the highest per-capita GNPs in the world.
Understanding GNP estimates is important for investors who are looking to invest in export-orientated countries and regions.
More on this topic:
Gross domestic product explained
Swiss online trading platform comparison
