What does GNP include in its calculation?

Gross National Product (GNP) measures the total economic output produced by a country's residents, regardless of where that production takes place. This includes not only the value of goods and services produced within the country's borders (domestic production) but also income earned by its residents from investments or work abroad.

GNP includes income earned by citizens through foreign investments as it captures the total economic activities of a nation's residents. Meanwhile, government purchases, while a component of a country’s overall economic activity, do not in isolation reflect the broader measures included in GNP, which is defined by the production of goods and services and income generated by residents from global activities.

Therefore, since GNP incorporates income from foreign investments along with government expenditures, the understanding that both government purchases alone and the income earned by citizens through foreign investments form part of the comprehensive picture presented by GNP is crucial.