What does GNP encompass?

GNP, or Gross National Product, refers to the total sum of all goods and services produced by the residents of a nation over a specific period, typically one year, regardless of whether the production occurs within the country's geographical boundaries or abroad. This means that GNP accounts for the economic output generated by a nation's citizens and businesses, no matter their location, thus providing a broader picture of economic activity attributed to that nation.

By focusing on the production by nationals, GNP includes the value of products made overseas by domestic companies and excludes the value of products made domestically by foreign companies. Therefore, it captures the economic contributions of a nation’s residents, leading to a comprehensive view of national economic activity and performance. This concept is critical when assessing the economic strength and productivity of a nation beyond mere geographic confines, balancing out the contributions of international operations as well.