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SubjectsEconomics
राष्ट्रीय आय से संबंधित समुच्चय: सकल राष्ट्रीय उत्पाद (GNP)
In this Class 12 Economics topic from “National Income and Related Aggregates,” students learn how Gross National Product (GNP) measures the value of final goods and services produced by a country’s normal residents during a given period. The topic explains the relationship between GNP and GDP, the role of Net Factor Income from Abroad (NFIA), and the formula GNP = GDP + NFIA. Students also understand how resident ownership of factors of production affects national income measurement.
Correct answer: C. 930
Explanation: NNP is obtained from GNP by subtracting depreciation: NNP = GNP − Depreciation. To recover the gross measure, add depreciation back. Therefore, GNP = 840 + 90 = 930. Subtracting would move in the wrong direction, while using 840 or 90 alone would ignore one part of the relationship. The calculation assumes both figures use the same valuation basis.
Correct answer: A. By adding depreciation to net national product
Explanation: Net national product is obtained from gross national product by subtracting depreciation: NNP = GNP − depreciation. Rearranging this identity gives GNP = NNP + depreciation. Thus depreciation must be added to the given net figure. Subtraction would move from gross to net, while multiplication has no role in this conversion.
Correct answer: A. GNP
Explanation: Gross National Product is abbreviated as GNP. The word ‘Gross’ indicates that depreciation has not been deducted, while ‘National’ means that the measure is associated with the production of a country’s normal residents. GDP instead refers to domestic territory, NDP is net domestic product, and NNP is net national product.
Correct answer: A. Gross National Product
Explanation: GNP stands for Gross National Product. It measures the value of final goods and services produced by a country’s normal residents during a period, whether the production takes place inside the country or abroad. ‘Gross’ means depreciation is not deducted, while ‘National’ distinguishes it from the territory-based concept of GDP.
Correct answer: A. Normal residents of the country
Explanation: GNP is based on the national or resident criterion. It measures the value of final production attributable to a country’s normal residents, regardless of whether they produce inside the domestic territory or in another country. Thus, income earned abroad by residents is included, while production within the country by non-residents is treated through the appropriate external-income adjustment.
Correct answer: A. GNP = GDP + NFIA
Explanation: Gross National Product is obtained by adjusting Gross Domestic Product for net factor income from abroad. The relationship is GNP = GDP + NFIA, where NFIA equals factor income received from abroad minus factor income paid to foreign factors within the domestic economy. If NFIA is negative, the numerical adjustment reduces GNP, but the formula still uses addition of the signed value.
Correct answer: A. Total market value of final goods and services produced in one year by the normal residents of a country, within and outside its borders
Explanation: GNP measures the market value of all final goods and services produced during a year by the normal residents of a country, whether production occurs inside the domestic territory or abroad. It is calculated as GNP = GDP + NFIA, where NFIA is net factor income from abroad. Option B describes GDP because GDP follows the territorial boundary criterion, not the resident criterion.
Correct answer: A. Depreciation has not been deducted
Explanation: In national-income accounting, the term gross means that depreciation, also called consumption of fixed capital, has not been deducted from the value of output. Therefore, GNP is a gross measure. When depreciation is subtracted from GNP, the result is Net National Product (NNP). Taxes, imports, and private income do not define the word gross.
Correct answer: A. NNP
Explanation: Subtracting depreciation, or consumption of fixed capital, from Gross National Product converts a gross national measure into a net national measure. Thus, NNP = GNP − depreciation. GDP and NDP are domestic-territory aggregates, while PFCE measures household consumption expenditure; neither is obtained by subtracting depreciation from GNP.
Correct answer: A. Production related to normal residents
Explanation: The word national in GNP refers to the normal residents of a country. Their production and factor income are counted even when the economic activity takes place abroad. This is why GNP is related to GDP through GNP = GDP + NFIA. The word domestic, in contrast, refers to production within the country’s geographical territory.
Correct answer: A. GNP will be greater than GDP
Explanation: The relationship between the two aggregates is GNP = GDP + NFIA. If NFIA is positive, residents receive more factor income from abroad than foreign factors receive from the domestic economy. Adding this positive amount to GDP makes GNP greater than GDP. Equality occurs only when NFIA is zero.
Correct answer: A. Less than GDP
Explanation: GNP is calculated as GNP = GDP + NFIA. When NFIA is negative, the income paid to foreign factors is greater than the factor income received from abroad. Adding a negative amount to GDP reduces the result, so GNP is less than GDP. GNP equals GDP only when NFIA is exactly zero.
Correct answer: B. Production by the normal residents of a country, whether it takes place within the country or abroad
Explanation: In GNP, national refers to the normal residents of the country, not simply to the geographical location of production. Therefore, output or factor income generated by the country’s residents abroad is included, while income generated domestically by non-residents is adjusted through NFIA. Option A is the territorial basis of GDP.
Correct answer: A. Net Factor Income from Abroad
Explanation: Factor income received from abroad is one component used to calculate Net Factor Income from Abroad. NFIA is calculated as factor income received from abroad minus factor income paid abroad. It is then added to GDP to obtain GNP: GNP = GDP + NFIA. The other options represent expenditure or trade concepts, not factor-income balances.
Correct answer: A. It is subtracted
Explanation: NFIA is defined as factor income received from abroad minus factor income paid abroad. Therefore, payments made to foreign factors are subtracted from receipts from abroad. A larger payment abroad lowers NFIA and may make it negative. NFIA is not depreciation or private consumption; it is a net factor-income balance used in the conversion from GDP to GNP.
Correct answer: A. Net Factor Income from Abroad
Explanation: NFIA stands for Net Factor Income from Abroad. It is calculated by subtracting factor income paid to the rest of the world from factor income received from the rest of the world. NFIA explains the difference between GDP and GNP because GNP = GDP + NFIA. The other expansions are not standard national-income terms.
Correct answer: A. 50
Explanation: Net Factor Income from Abroad (NFIA) is calculated as factor income received from abroad minus factor income paid to abroad. Therefore, NFIA = 200 − 150 = 50. Since receipts are greater than payments, the result is positive. Thus, option A is correct. A negative value would arise only when factor income paid abroad exceeds factor income received from abroad.
Correct answer: B. -80
Explanation: Net Factor Income from Abroad (NFIA) is obtained by subtracting factor income paid abroad from factor income received from abroad. Hence, NFIA = 100 − 180 = −80. The negative sign is important because payments to foreign factors exceed income received from foreign factors. Therefore, option B is correct; 80 represents only the absolute difference, not the signed NFIA.
Correct answer: A. GNP at market price (GNP_MP)
Explanation: GNP at market price is represented by GNP_MP, where GNP means Gross National Product and MP means market price. It measures the gross value of final goods and services produced by the normal residents of a country, valued at market prices. Hence, option A is correct.
Correct answer: A. GNP at factor cost (GNP_FC)
Explanation: GNP at factor cost is written as GNP_FC. The symbol GNP identifies gross national product, while FC indicates that the value is measured at factor cost, or the payments made to factors of production. This differs from GNP_MP, which includes net indirect taxes. Therefore, option A is correct.
Correct answer: A. Net factor income from abroad (NFIA)
Explanation: GNP at market price is obtained from GDP at market price by adding Net Factor Income from Abroad: GNP_MP = GDP_MP + NFIA. NFIA reflects factor income received from abroad minus factor income paid abroad. Depreciation changes gross into net measures, while indirect taxes explain the market-price and factor-cost distinction. Hence, option A is correct.
Correct answer: A. When Net Factor Income from Abroad is positive
Explanation: The relationship between these aggregates is GNP = GDP + NFIA, where NFIA means Net Factor Income from Abroad. Therefore, GNP will be greater than GDP when NFIA is positive, meaning factor income received from abroad exceeds factor income paid abroad. If NFIA is negative, GNP is lower than GDP; if it is zero, both are equal. Thus, option A is correct.
Correct answer: A. It is adjusted through NFIA because it is factor income paid abroad
Explanation: Income earned domestically by foreign companies is included in domestic product because production occurs within the country. However, it is generally treated as factor income paid to the rest of the world and is deducted while calculating NFIA. Since GNP = GDP + NFIA, this adjustment removes foreign residents’ income from the national measure. Therefore, option A is correct.
Correct answer: A. It contributes positively through the receipt side of NFIA
Explanation: Factor income earned abroad by a country’s resident is received from the rest of the world. It therefore enters the receipts side of NFIA and, other things remaining equal, raises GNP above GDP. The complete relationship is GNP = GDP + NFIA. It is not depreciation or consumption expenditure, so option A is correct.
Correct answer: A. Gross national aggregate
Explanation: GNP is a gross national product aggregate. “Gross” means that depreciation, or consumption of fixed capital, has not yet been deducted. “National” means that the measure relates to the production or factor income of a country’s normal residents, including their income from abroad and excluding factor income paid to foreign residents. Hence, option A is correct.
