In the modern world, even a simple student not connected with the economy will still be familiar with various financial terms, macro- and microeconomic indicators, up to accounting with taxation.
The popularity of terminology so necessary for the society of science can be connected with various circumstances. However, few would disagree that the conditions of life in a market economy encourage people to keep up with the flow of information. This way of life helps people to maintain personal competitiveness as a labor resource, increase financial awareness in order to accumulate capital, provide the necessary level of tax literacy for the elementary survival of both private entrepreneurs and ordinary taxpayers, especially in our country. And such terms of economic science as GDP and GNP, in turn, are the most important macroeconomic indicators that any member of modern society hears about every day. They determine the level of development of each country, the prosperity of its citizens, its role in the global political arena, the possibility of influencing certain events in a sector that affects its interests, and many other indicators.
Although these two concepts are almost equally important foreconomy of any state, however, they have precise economic definitions, which summarize all the above importance. So what is GDP and GNP?
Gross domestic product (GDP) is the total volume of products (in price terms) produced by economic entities within the state, regardless of their residence.
Gross national product (GNP) is the total volume of material goods produced by economic entities of the state, regardless of their location - inside or outside the country.
Thus, the difference between GDP and GNP lies in the differences in the total value of material goods produced within the country by residents and non-residents of the state, and the value of goods produced outside of it, but only by residents of the country. That is, the cost indicator of all cumulatively produced products within Russia and recalculated by the relevant organizations, regardless of who owns the plants and factories for its production, will be called GDP. Products manufactured by Russian plants and factories, regardless of in whose territory they were manufactured, are GNP. In addition, although GDP and GNP are concepts that often appear together in the information flow of modern society, they are not interchangeable indicators. In fact, their joint use is carried out for a comparative purpose, to determine the difference between the values. With the help of the established balance of GDP and GNP-indicators, economists getan opportunity to analyze the current situation in the state, identify the causes of various events affecting the country's economy, and also determine the tools of influence to improve its situation.
Also, GDP and GNP include not only products that increase the welfare of society, but also those that are aimed at restoring consumed goods or products that have worn out. Nevertheless, the growth of these indicators is usually compared with the growth of the welfare of society. Although equating this kind of data in many cases may be incorrect.
