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

• A. GNP is adjusted for inflation (real) while GDP is not adjusted for inflation (nominal).
• B. GNP includes only intermediate goods while GDP includes only final goods.
• C. 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.
• D. GNP measures production within a country's borders, while GDP measures production by a country's residents regardless of where it occurs.

Answer: (C)

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 final 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 final goods and services produced by the residents (nationals) of a country, regardless of where the production takes place 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 neither GDP nor GNP inherently adjusts for inflation; both can be measured in nominal or real terms depending on whether inflation is accounted for.
5. Step 5: Summarize that the correct distinction is that GNP includes production by a country's residents abroad, whereas GDP includes all production within the country's borders regardless of who produces it.