Why is a resident’s factor income earned outside the domestic territory added while calculating GNP?
Answer and explanation
Correct answer: Because GNP is based on the income of normal residents
GNP follows the national or residence concept rather than only the domestic-territory concept. Therefore, factor income earned abroad by a country’s normal residents is added to domestic product through NFIA. This adjustment ensures that GNP reflects the production and factor income associated with residents, wherever the activity occurs.
Frequently asked questions
What is the correct answer to this question?
Because GNP is based on the income of normal residents
Why is this the correct answer?
GNP follows the national or residence concept rather than only the domestic-territory concept. Therefore, factor income earned abroad by a country’s normal residents is added to domestic product through NFIA. This adjustment ensures that GNP reflects the production and factor income associated with residents, wherever the activity occurs.
Which subject and chapter does this question cover?
This is a Class 11 Economics question. Chapter: National Income and Related Aggregates.
Student feedback
Was this question useful?
👍 0 Helpful 👎 0 Not helpful
Yes 0% No 0%
0 responsesStudent Reviews
No published reviews yet.
