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GNP vs GDP

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What is the difference between GDP and GNP? Which is a more accurate measure of local income and why?

I understand the difference between GDP and GNP however, I am unsure on how to answer the second question as to which one is more accurate with regards to local income and why.

Thank you for your help!

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Solution Preview

As you know, GDP measures the goods and services produced within the territorial boundaries of a country. GNP, on the other hand, measures the income of all the ...

Solution Summary

This solution discusses whether GDP or GNP is a better measure of local income and why this is so.

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Practice questions

Investment in a macroeconomic analysis is the money that only the firm spends for the purpose of building capital stocks, such as equipment and facilities. Why is the import subtracted from the export when measuring GDP from the expenditure side? Part of the consumption, investment and government expenditures being made are not only for the domestic goods, but also for the goods that are being made abroad and imported into the nation" We want to take away any component of those three components which are not produced in a nation.
Question 1. Suppose that CA-Gyros Technology hired an engineer from Hong Kong in the year 2007, and paid her $100,000 salary in 2007. Give a detailed explanation about how the engineer's income generation as described above affects GDP and GNP of U.S.

Question 2. Consider the following information.

2010 (base year) 2011
Price Quantity Price Quantity
Car $100 400 $120 420
Rice $25 2,000 $36 2,005

2012
Price Quantity
Car $130 450
Rice $38 2,100

(1) Compute nominal GDP, real GDP, and the GDP deflator for each year, using 2010 as the base year.
(2) Compute the percentage change in nominal GDP, real GDP, and the GDP deflator in 2011 and 2012 from the preceding year.
(3) Did economic well-being rise more in 2011 or 2012? Explain.

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