Gross Domestic Product (GDP), Net Domestic Product (NDP) and Gross National Product (GNP)?

Question

Differentiate between Gross Domestic Product (GDP), Net Domestic Product (NDP) and Gross National Product (GNP) and what are different ways of measuring GDP.

Answer 1

These concepts are defined according to international economic standards by the IMF and OECD. Thus, while I have given references for Australia, they are identical for all developed and most undeveloped countries.

GDP is the measure of production for the economy as a whole. (see para 3.4) GDP is the sum, for a particular period, of the gross value added of all resident producers, where gross value added is equal to output less intermediate consumption. GDP can also be derived as the sum of factor incomes (i.e. compensation of employees, gross operating surplus and gross mixed income) and net taxes on production and imports; and as the sum of all final expenditures by residents (final consumption expenditure and gross fixed capital formation), changes in inventories and exports less imports of goods and services.

NDP is GDP less depreciation (what national accounts call consumption of fixed capital).

GNP is the market value of all final goods and services produced by permanent residents of a nation within a given period of time. It differs from GDP if permanent residents produce goods or services outside the country (eg a US resident produces something in the UK) or if a foreigner produces something in the US (eg a French resident working temporarily in the US).

Gross National Expenditure is another concept that people confuse with the ones above. It is C+I+G or in other words, GDP - (X-M).

Answer 2

Gross National Product is the sum of the value of a nation's annual output of goods and services.

Gross Domestic Product is the value of goods and services, not counting products and services outside the national borders.

Net Domestic Product is the value of goods and services minus imported goods and services.