How can GDP be bigger or smaller than gnp?

Answer 1

The most appropriate measure to use to illustrate the difference is the output measure of GDP/GNP.

Roughly speaking the GDP of a country is the total value of all goods and services that are produced in the country - by any company located in the country irrespective of the nationality of the company. By contrast, GNP is a measure of all goods and services produced by companies that are owned by the country (or its nationals), wherever that company operates.

So, if foreign owned companies in a country produce more than the country's foreign holdings do wherever they are located, then GDP will exceed GNP. And conversely.