5. Differences Among GDP, GNP, and National Income (NI)
Concept
Full Name
What It Measures
Key Difference &
Formula
Location-
Gross
GDP
Domestic
Product
The total market value of all
based: "Where"
final goods and services
production happens.
produced within a country's
Includes output by
borders in a year.
foreign-owned firms
inside the country.
Ownershipbased: "Who" produces
it. Includes income
The total market value of all
Gross
GNP
National
Product
final goods and services
produced by a country's
citizens/resources
(nationals), regardless of
location.
citizens earn abroad,
excludes income
foreigners earn here.
GNP = GDP + Net
Income From Abroad
(NIFA)
NIFA = Income citizens
earn abroad MINUS
Income foreigners earn
here.
Income-based: Focuses
NI
The total income earned by
on earnings.
all factors of
NI = GNP -
National
production (labour, land,
Depreciation - Indirect
Income
capital) in a period. It is what
Taxes + Subsidies
is available for spending by
It is the best indicator of
households.
the potential standard
of living.
Simple Analogy for T&T:
•
•
•
GDP: Measures everything made in Trinidad and Tobago (e.g., oil from BP/Shell,
Point Lisas chemicals, local vegetables).
GNP: Measures everything made by Trinbagonian resources/citizens. Adds income
a Trinidadian doctor earns in New York, but subtracts profits a Canadian bank earns
from its branches in Trinidad.
NI: Represents the total wages, rent, interest, and profit earned by Trinbagonians
from their resources. It's the pie of income the nation has to share.