The Gross National Product, or GNP, is a measure of the total output of a country`s economy. It includes all economic activity done for compensation, so that the housekeeping work that a woman might do for herself would not be counted but what she paid to some other person to do the same thing would. Taxes as such are not included, although government purchases are.
The GNP also excludes transfer payments, such as interest and pensions. Government expenses are included when they represent activity. For this reason, if the government sends a Social Security check to a retiree, that is regarded as simply transferring money from a government account to an individual and does not per se represent economic activity. However, if the government pays a doctor to give the same retiree a checkup, that is counted.
Private transfers are not counted. If I hire the neighbor to mow my lawn for $10 and he spends it to go to the prom, that`s a total of $20 for the GNP. If I give my son $10 to go to the prom, it`s just $10 for the GNP, whether he also mows our lawn or not.
The GNP for the United States considers economic production by all "Americans," which includes corporations, whether acting at home or abroad. A better picture of domestic economic activity is the Gross Domestic Product, which eliminates the economic activity of American companies acting abroad and includes the American activity of foreign corporations. The GDP is now more widely used, although the two measures are fairly close.
Most measures of GNP are made from official statistics. For this reason, the "shadow economy" of transactions that appear in no official records are disregarded. The difference is practical, rather than logical. The sale of tobacco, a deadly, addictive substance, is legal, taxed, easily quantified, and is included in the GNP. The sale of crack cocaine, a deadly, addictive substance, is illegal, not taxed, not easily quantified, and is excluded from the GNP.