There are two approaches to calculating country GDP: the income approach and the expenditure method. The income approach adds up the per capita income over a specific period of time. It includes the gross compensation to employees, gross profits incurred by production units and taxes (after deducting subsidies). However, the expenditure method utilizes the total government spending, consumption, investment and net exports to calculate the GDP.
The formula to compute country GDP is
GDP = C + G + I + NX
C = consumer spending
G = sum of government spending
I = sum of businesses spending
NX = net exports (calculated as Exports - Imports)
The Gross National Product or GNP considers the final goods and services produced by factors of production that are owned by a particular country's residents over a period of time. Although the GDP and GNP are very similar in nature, they differ on the concept of production in foreign-owned companies. Unlike the GDP, country GNP does not take into account the factors of production owned by foreign nationals in a particular country. However, it utilizes production of goods and services at an overseas unit owned by the particular country’s resident.