How does the treatment of international transactions differ with respe

How does the treatment of international transactions differ with respect to gross national product and gross domestic product? Explain. Why do you think that the U.S government has switched from using GNP to using GDP

What will be an ideal response?

ANSWER

Gross national product includes earnings of U.S. corporations overseas and U.S. residents working overseas, whereas gross domestic product does not include these earnings. Gross domestic product includes earnings from current production in the United States that accrue to foreign residents or foreign-owned firms, while gross national product excludes these items. GDP has become more attractive because in the current, more globalized economy, the nationality of workers and firms has become harder to distinguish. Hence, the switch to relying on location of production.