In Pakistan, which would you want to be bigger, the gross domestic product or the gross national...

Question:

In Pakistan, which would you want to be bigger, the gross domestic product or the gross national product? Why?

Gross Domestic Product and Gross National Income:

Gross domestic product measures the total value of goods and services produced for the market in a country. Gross national income is gross domestic product plus net income earned by foreign residents.

Answer and Explanation:

In Pakistan, gross national product is higher than gross domestic product. For example, in 2017, gross domestic product is $305 billion. Gross national income is $1.15 trillion. Thus gross national income is more than three times the domestic product.

Gross national income is related to gross domestic product as follows:

  • gross national income = gross domestic product + factor income earned by residents in foreign countries - factor income earned by foreigners in domestic economy

Pakistan has a sizeable workforce that work abroad and remit income back to Pakistan, thus the factor income earned by Pakistan nationals in foreign countries is very large. Hence, gross national income is many times larger than GDP.


Learn more about this topic:

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Gross Domestic Product: Definition and Components

from Economics 102: Macroeconomics

Chapter 4 / Lesson 3
58K

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