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8 May, 2015 - 11:03

The gross domestic product is the sum of all the final goods and services produced by the residents of a country in one year. Summing the production of residents (rather than nationals as in GNP) gives often a more accurate picture of the level of activity in a country.

The difference between GDP and GNP is net unilateral transfers and factor income of foreigners.

Countries which have many foreign firms operating within their territory, have a gross domestic product larger than the gross national product. On the contrary, countries, such as the United States or Japan, which have firms operating in foreign countries, have a gross domestic product smaller than the gross national product (the net factor income from foreigners is negative).