The Problems with Using GDP/GNP as a Measurement to Compare Welfare Between Countries

Use of GDP / GNP as a measure of the welfare scale between countries National income is defined as the sum of all goods and services, ie all income generated over the normal year. It examines the level of economic activity during this period. National income is a measure of "flow" because the country's income runs over a period of time rather than at a certain point in time like wealth. However, the way to display national income is the figure of GDP / GNP.

GDP is just one way to measure the total output of the economy. Gross national product (GNP) is another way. As mentioned earlier, gross domestic product is the sum of all the goods and services produced in that country. GNP narrowed this definition slightly: it is the sum of all the goods and services produced by the permanent resident of that country, regardless of where they are. The important difference between gross domestic product and gross domestic product is the difference in production calculation between domestic foreign countries and foreign countries. Regarding the country's gross domestic product, production of foreigners in that country will be counted, production of foreign nationals will not be counted. Regarding the gross national product, the production of foreigners in a specific country is not counted, and the production of citizens abroad is calculated. Therefore, GDP is the value of goods and services produced in one country, but gross national product is the value of goods and services produced by the citizens of that country.

First of all, the main alternative to GDP is GNP. On the other hand, Gross Domestic Product (GDP) is used as a measure to outline the total economic output of a particular country. On the other hand, regardless of where the production process is carried out, GNP reflects domestic individual or company production. In this way, the gross domestic product reflects direct investment in other countries (foreign direct investment) in one country, while the gross domestic product reflects direct investment abroad. According to its net FDI structure, the ratio of GDP to GNP in that country may be lower than 1 or higher. In any case, these two methods are equally important when assessing the economic development of the country. GDP reflects the attractiveness of the country and its markets to foreign companies (perhaps due to market size, labor costs, infrastructure factors, or general skill level in the economy), whereas GNP reflects the size of multinational corporations It reflects its strengths. Companies investing in other areas