In national income accounting, how is gross national product (GNP) different from gross domestic product (GDP)?

• A. GNP includes only goods production while GDP includes both goods and services production.
• B. GNP measures production by a country’s residents (nationals) regardless of where it occurs, while GDP measures production within a country’s borders regardless of who produces it.
• C. GNP measures production within a country’s borders, while GDP measures production by a country’s residents regardless of where it occurs.
• D. GNP excludes depreciation (capital consumption allowance) while GDP includes depreciation.

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the definitions of GDP and GNP. Gross Domestic Product (GDP) measures the total value of all goods and services produced within a country's borders during a specific time period.
2. Step 2: Recognize that Gross National Product (GNP) measures the total value of all goods and services produced by the residents (nationals) of a country, regardless of where they are located in the world.
3. Step 3: Identify the key difference: GDP focuses on location of production (within the country), while GNP focuses on ownership or nationality of the producers (residents of the country).
4. Step 4: Note that both GDP and GNP include goods and services production, so the distinction is not about goods versus services.
5. Step 5: Understand that depreciation (capital consumption allowance) is not the distinguishing factor between GDP and GNP; both can be measured gross or net of depreciation.