A:

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.

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