Question : Which of the following identities is correct regarding Gross National Product (GNP)?
Option 1: GNP = GDP (Gross Domestic Product) + Factor income earned by the domestic factors of production employed in the rest of the world + Factor income earned by the factors of production of the rest of the world employed in the domestic economy.
Option 2: GNP = GDP – Factor income earned by the domestic factors of production employed in the rest of the world – Factor income earned by the factors of production of the rest of the world employed in the domestic economy.
Option 3: GNP = GDP + Factor income earned by the domestic factors of production employed in the rest of the world – Factor income earned by the factors of production of the rest of the world employed in the domestic economy.
Option 4: GNP = GDP – Factor income earned by the domestic factors of production employed in the rest of the world + Factor income earned by the factors of production of the rest of the world employed in the domestic economy.
Correct Answer: GNP = GDP + Factor income earned by the domestic factors of production employed in the rest of the world – Factor income earned by the factors of production of the rest of the world employed in the domestic economy.
Solution : The correct option is GNP = GDP + Factor income earned by the domestic factors of production employed in the rest of the world – Factor income earned by the factors of production of the rest of the world employed in the domestic economy .
GDP (Gross Domestic Product) is the total value of all final goods and services produced within a country's borders in a given time. Factor income earned by the domestic factors of production employed in the rest of the world is the income earned by domestic residents from their investments and labour in other countries.
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