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Activity Discussion General Discussion Define GDP with some examples. What is difference between GDP and GNP. Reply To: Define GDP with some examples. What is difference between GDP and GNP.

• ### Gaurav

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April 3, 2024 at 11:13 am
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Gross Domestic Product (GDP) is a commonly used measure of a country’s economic activity. It represents the total value of all goods and services produced within a country’s borders during a specific period, typically a year. GDP is often used to gauge the overall health and size of an economy.

GDP can be calculated using three different approaches:

1. Expenditure approach: GDP is calculated by summing up the total spending on goods and services within the economy. This includes consumption by households (such as purchases of food, clothing, and electronics), investment by businesses (including spending on machinery, equipment, and structures), government spending (such as on infrastructure and public services), and net exports (exports minus imports).

2. Income approach: GDP is calculated by summing up the total income earned by individuals and businesses within the economy. This includes wages, salaries, and profits earned by individuals and corporations.

3. Production approach: GDP is calculated by summing up the value added at each stage of production. This approach accounts for the value of goods and services at each step of the production process, from raw materials to the final product.

Here are a few examples to illustrate GDP:

1. If a country produces \$1 million worth of cars, \$500,000 worth of furniture, and \$300,000 worth of software in a year, the GDP would be \$1.8 million.

2. Suppose a country has household consumption of \$2 trillion, business investment of \$1 trillion, government spending of \$500 billion, and exports of \$800 billion, while imports amount to \$600 billion. The GDP of that country would be the sum of these figures, which is \$3.7 trillion.

Gross National Product (GNP) is a related economic measure that takes into account the income earned by a country’s residents, regardless of their location. GNP includes not only the value of goods and services produced within a country’s boundaries (as in GDP) but also the income earned from investments and work abroad. In other words, GNP measures the total output of the residents of a country, regardless of where that output occurs.

The main difference between GDP and GNP is that GDP focuses on economic activity within a country’s borders, while GNP includes income earned by a country’s residents both domestically and internationally. The difference between GDP and GNP arises when there are significant earnings from foreign investments or when a country has a large number of its citizens working abroad.

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