Q.Distinguish between Gross Domestic Product (GDP) and Gross National Product (GNP).

The difference between domestic and national product lies entirely in whose production is counted — where it is produced versus who produces it.

Basis of the distinction — territory vs residence:

• Gross Domestic Product (GDP) measures the value of final goods and services produced within the domestic territory of a country, no matter whether the producers are residents or foreigners. A foreign firm's factory in India adds to India's GDP.

• Gross National Product (GNP) measures the value of final goods and services produced by the normal residents of a country, whether within the country or abroad. It adds the net factor income residents earn abroad and removes the factor income foreigners earn domestically.

The link between them:

$GNP = GDP + \text{Net Factor Income from Abroad (NFIA)}$ …

Students often say GNP simply 'includes exports' or 'includes foreign trade' — that is wrong. The only difference between GDP and GNP is net factor income from abroad (a factor-income …