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GDP and GNP

# GDP and GNP - inside the country and contributing to the...

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GDP and GNP : The first pair of the national aggregates in the form of Gross Domestic Product and Gross National Product values. The value GDP is the result of all productive activities carried out within the country. Therefore GDP is a geographic concept. By and large we are primarily interested in the GDP value. But in modern times there are large-scale international transactions taking place between countries as well. Citizens of a country like technicians, doctors, lawyers, bankers etc. go abroad and earn considerable incomes. This should genuinely form part of the national income of a country. But it is not earned within the territory of the country and hence is not included in the GDP. If we want to compute GNP such income (N) earned abroad will have to be added to GDP. On the contrary foreign citizens may be working

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Unformatted text preview: inside the country and contributing to the value of the GDP. Since they are not the nationals their contributions (F) will have to be deducted to arrive at an accurate value of the GNP. In other words net of the income earned abroad (N-F) when adjusted to the GDP gives the GNP. GDP + (N -F) = NNP For example , assume the values of GDP, N and F as 1780, 230, 310 respectively. Then, GNP = 1700 GDP + N - F = GNP 1780 + 230 - 310 = 1700 On the other hand, if we begin with GNP then the reverse operation will be necessary. GNP- N+F = GDP 1700 - 230+310 = 1780 Note that GNP will be more or less than GDP according to relative amounts of N and F. If N will be greater than F then GNP would be greater than GDP but if N will be less than F, GNP will be smaller than GDP (Hence GNP < GDP)....
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GDP and GNP - inside the country and contributing to the...

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