Gross domestic product is the total market value of all final goods and services produced by factors of production within a nation's border during a period of one year. In other words GDP is a flow of production produced within the country by domestically located resources in a year.

Gross National Product (GNP) on the other hand, the measure of all final goods and services produced by the citizens within their own country as well as outside- the country during a period of one year. In other words, GNP expresses the money value of flow of goods and services produced within the country and the net income received from abroad during a period of one year. Thus when we move from GDP to GNP, we add factor income receipts from foreigners and subtract factor income payments to foreigners.

Formula for GDP:

GDP = GNP - Net Foreign Income from Abroad

How to get GNP

It should be noted that the output produced within a country using resources owned by foreigners represent incomes earned by non-nationals within the country which leads resources outflow from the country. On the other hand, assets owned by nationals abroad represent incomes earned by nationals outside the country which is an inflow of income from abroad.

The difference between these "inflows" and "outflows" is recorded as net (property) Income from abroad. If we add this item to GDP, then we arrive at the GNP figure i.e. GNP = GDP + Net property income from abroad or GNP = GDP + income earned by nationals abroad ¬incomes earned by non-nationals within the country.