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Economics Essay

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Hey guys, this is the question I got for my homework and I'm kind of unsure how to further expand on that. Please help ? I put in my answer as well, so far. Feel free to point out any errors I've made !

1. Explain which is likely to be higher in a Less Developed Country, Gross National Product or Gross Domestic Product.

GDP (Gross Domestic Product) is the value of the total worth of a country. It can be measured by calculating the sum of the country’s production and services over a period of time. GNP (Gross National Product) is the gross domestic product plus the total capital gains from foreign investment - income earned by foreign nationals domestically. Through GNP, an accurate portrait of a nation’s yearly economy can be analysed and studied for trends since GNP calculates the total income of all the nationals of a country. This gives a far more realistic picture than the income of foreign nationals in the country, as it is more reliable and permanent in nature. They are both important measures. GDP gives an overall snapshot of the country's economic position, whereas GNP is an indicator of domestic contribution to GDP relative to foreign investment/income.

The main difference between gross national product and gross domestic product is the net property income received from abroad. A high proportion of a less developed country’s economic activity may be generated by multi-national companies. This is because a less developed country would is unlikely to have the ability to expand their country’s domestic output due to the limitations in supply of the resources in the country. However, if the profits received from the multi-national companies are repatriated it may result in a negative net property income from abroad. The result of this is that the gross domestic product will be higher than the gross national product as net income from abroad has decreased.

In some cases however, it may happen that gross national would be greater than gross domestic product in some less developed countries receiving substantial workers’ remittances.

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