Gross National product (GNP) refers to the money value of all final goods and services produced by the residents of a country during an accounting year. It has two components. (i) Gross Domestic Produced at market prices, (ii) Net factor income from abroad.

(i) Gross Domestic Product at Market Price:

It is stated above that gross domestic product at market price is the money value of all final goods and services produced inside the domestic territory of the country during an accounting year.

Inside the domestic territory, goods are produced both by residents and non-residents. All the nationals of the home country staying inside the country are residents.

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Foreigners who stay inside the home country for a period more than one year are also the residents. But the foreigners who stay inside the home country for a period less than one year are non-residents. Money value of all final goods produced by both residents and non residents inside the domestic territory during an accounting year is known as Gross Domestic Product (GDP).

(ii) Net Factor Income from abroad (NFIA):

It is stated that gross national product (GNP) is the money value of all final goods produced by all residents of a country during an accounting year. But GDP includes the money value of all final goods produced by all residents and non-residents.

Therefore, while calculating GNP, we have to deduct the money value of final goods produced by the non-residents from GDP. Again, there are some residents of the home country who stay in the foreign countries and produce goods and services there. Money value of final goods produced by these residents outside domestic territory is not included in GDP, but is a part of GNP. Therefore, money value of final goods produced by the residents of the home country in the foreign countries is to be added to GDP while calculating GNP.