Gross National Product: Definition, Formula, Examples
                     GROSS 
NATIONAL 
PRODUCT: 
DEFINITION, 
FORMULA, 
EXAMPLES
INTRODUCTION
Gross national product (GNP) is 
the value of all goods and 
services made by a country's 
residents and businesses, 
regardless of production 
location. 
Source: www.thebalance.com
HOW GNP IS 
CALCULATED?
GNP is calculated by adding 
personal consumption 
expenditures, government 
expenditures, private domestic 
investments, net exports, and 
all income earned by residents 
in foreign countries, minus the 
income earned by foreign 
residents within the domestic 
economy. 
Source: corporatefinanceinstitute.com
MATHEMATICAL 
FORMULA
• The official formula for calculating 
GNP is as follows:
Y = C + I + G + X + Z  Where
• C – Consumption Expenditure
• I – Investment
• G – Government Expenditure
• X – Net Exports (Value of imports 
minus value of exports)
• Z – Net Income (Net income inflow 
from abroad minus net income 
outflow to foreign countries)
Source: byjus.com
ALTERNATE 
MATHEMATICAL 
FORMULA
• Alternatively, the Gross 
National Product can also be 
calculated as follows:
GNP = GDP + Net Income 
Inflow from Overseas – Net 
Income Outflow to Foreign 
Countries Where:
• GDP = Consumption + 
Investment + Government 
Expenditure + Exports – 
Imports
Source: byjus.com
IMPORTANCE OF 
GNP
• GNP is considered as an 
important economic 
indicator by economists. It is 
used by them for finding 
solutions to the economic 
issues such as poverty and 
inflation.
• When income is calculated 
on the basis of per person 
irrespective of the location, 
GNP becomes a much more 
reliable factor than GDP.
Source: byjus.com
IMPORTANCE OF 
GNP CONT.
• The information obtained 
from GNP is used for 
analysing the BOP (Balance 
of Payments). In some 
countries or unions, such as 
the European Union, 
economists use GNI or gross 
national income.
Source: byjus.com
DRAWBACKS OF 
GNP
• The foreign exchange rate 
fluctuates. Therefore, it 
impacts the calculation.
• It does not help in 
determining whether an 
economy is actually growing 
or shrinking.
Source: byjus.com
DRAWBACKS OF 
GNP CONT.
• GNP Inflated due to Expats: 
Some nations, particularly 
poorer nations, have a high 
outflow of skilled workers 
from their countries. The 
income they earn from 
those countries is then sent 
home, thereby inflating GNP 
figures.
Source: corporatefinanceinstitute.com
ECONOMIC 
INDICATOR
• The GNP is a useful 
economic indicator, 
especially when measuring 
a country’s income from 
international trade. 
• Both economic indicators 
should be considered when 
valuing a country’s 
economic net worth to get 
an accurate position of the 
economy.
Source: corporatefinanceinstitute.com
GNP VS. GDP
• The terms differ in what 
constitutes an economy 
since GDP measures the 
domestic levels of 
production while GNP 
measures the level of the 
output of a country’s 
residents regardless of their 
location. 
Source: corporatefinanceinstitute.com