Gross national product (GNP) measures total income received by a country’s residents within a given period, while the balance of trade is the difference between a country’s exports and imports. The balance of trade, or net exports, is a component of GNP and of gross domestic product (GDP). If net exports rise, GNP will also rise, and if net exports fall, so will GNP. There is no relationship other than this, so GNP does not reflect the balance of trade.

GNP is a measure of the income accruing to residents of a country within a period of time, regardless of where that income is realized. It differs from GDP in that GDP assesses only the total income generated on a country’s territory, regardless of the recipient of the income. GNP, like GDP, can be calculated by adding up consumer spending, investment, government spending and net exports. GNP differs from GDP only in the choice of data used for calculation.

The balance of trade, or net exports, is the total value of a country’s exports in a given time period minus the total value of its imports. Typically, a trade surplus (exports exceeding imports) is desirable, and a trade deficit (imports exceeding exports) is undesirable. Many other factors are also relevant; for example the structure of imports and exports, the total time the balance has been in surplus or deficit, and the current stage of the business cycle. As such, it is premature to say without additional information whether a given trade deficit or trade surplus is good or bad.

  1. What is the functional difference between GDP and GNP?

    Find out the difference between GDP and GNP, and how each brings a different perspective to the meaning of economic success. Read Answer >>
  2. What insights are economists trying to capture with GNP?

    Learn how, despite its disfavor as a primary economic indicator, GNP provides special insight into the value of production ... Read Answer >>
  3. What are some alternatives to real GDP?

    Learn about economic measures used instead of real GDP and the limitations of real GDP. Find out in which situations nominal ... Read Answer >>
  4. When has the United States run its largest trade deficits?

    Learn in what year the United States ran its largest negative balance of trade as a result of imports greatly exceeding the ... Read Answer >>
  5. What impact does the balance of trade have on GDP calculations?

    Read about the impact of the balance of trade on a nation's gross domestic product, and why each of these figures can be ... Read Answer >>
  6. How does gross domestic product (GDP) affect standard of living?

    Find out how gross domestic product is used to measure standard of living. Find out which alternative metrics rely on GDP ... Read Answer >>
Related Articles
  1. Investing

    What's the Balance of Trade?

    The balance of trade is the difference between the value of all the goods and services a country exports and the goods and services it imports.
  2. Insights

    The Balance Of Trade

    The balance of trade is the difference between a country’s imports and exports. A trade deficit occurs when a country buys or imports more goods from other countries than it sells or exports. ...
  3. Insights

    Interesting Facts About Imports and Exports

    Learn how imports and exports exert a profound influence on the consumer and the economy.
  4. Insights

    In Praise Of Trade Deficits

    When a country imports more than it exports, is it a recipe for disaster or just part of a larger cycle?
  5. Taxes

    How Tax Cuts Stimulate the Economy

    Learn the logic behind the belief that reducing government income benefits everyone.
  6. Insights

    How to Calculate the GDP of a Country

    The GDP of a country can be calculated using two different approaches.
  7. Insights

    An Analysis Of The US Trade Deficit

    The United States' trade deficit is historically large, the biggest in the world. With luck, it'll get even larger.
  8. Insights

    5 Government Statistics You Can't Trust

    Government economic statistics carry a lot of weight, but there are some significant gaps in the methodology.
  9. Insights

    Why Deficits Are Flawed Measures of Unfair Trade

    Trump’s obsession with erasing the $500B U.S. trade deficit is flawed economics, experts say.
  1. Okun's Law

    The relationship between an economy's unemployment rate and its ...
  2. Net Foreign Factor Income (NFFI)

    The difference between a nation’s gross national product (GNP) ...
  3. Net Exports

    Net exports are the value of a country's total exports minus ...
  4. Balance Of Trade - BOT

    The balance of trade is the difference between a country's import ...
  5. Per Capita

    A Latin term that translates into "by head," basically meaning ...
  6. Trade Surplus

    An economic measure of a positive balance of trade, where a country's ...
Hot Definitions
  1. Perfect Competition

    Pure or perfect competition is a theoretical market structure in which a number of criteria such as perfect information and ...
  2. Compound Interest

    Compound Interest is interest calculated on the initial principal and also on the accumulated interest of previous periods ...
  3. Income Statement

    A financial statement that measures a company's financial performance over a specific accounting period. Financial performance ...
  4. Leverage Ratio

    A leverage ratio is any one of several financial measurements that look at how much capital comes in the form of debt, or ...
  5. Annuity

    An annuity is a financial product that pays out a fixed stream of payments to an individual, primarily used as an income ...
  6. Restricted Stock Unit - RSU

    A restricted stock unit is a compensation issued by an employer to an employee in the form of company stock.
Trading Center