In economics, the term gross national product (GNP) denotes the value of a country’s total economic activity – both within its borders and internationally.
In contrast to gross domestic product (GDP) which only measures the value of economic activity within a country’s borders, gross national product also accounts for commercial activities carried out outside of a country by its resident companies and individuals.
Gross national product is calculated by adding a country’s GDP to its net income receipts (NR + GDP = GNP).
While GDP serves as an indicator of the state of a country’s local economy, GNP indicates the total worldwide economic activity of a country’s residents and therefore serves as an indicator of the overall wealth of a country’s citizens.
Example: A small country with a small population may have a very low GDP because a relatively low volume 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. So although the country’s GDP may be relatively low, the wealth of its residents is high due to their international business dealings.
Understanding GNP estimates is important for investors who are looking to invest in export-orientated countries and regions.