How is net factor income from abroad treated while measuring Gross National Product (GNP)?
Answer and explanation
Correct answer: It is added to GDP
GNP is a residence-based measure of production and is obtained by adjusting GDP for net factor income from abroad. The relationship is GNP = GDP + NFIA, where NFIA is factor income received by residents from abroad minus factor income paid to non-residents. If NFIA is negative, the numerical adjustment is a subtraction, but the accounting treatment is still addition of NFIA.
Frequently asked questions
What is the correct answer to this question?
It is added to GDP
Why is this the correct answer?
GNP is a residence-based measure of production and is obtained by adjusting GDP for net factor income from abroad. The relationship is GNP = GDP + NFIA, where NFIA is factor income received by residents from abroad minus factor income paid to non-residents. If NFIA is negative, the numerical adjustment is a subtraction, but the accounting treatment is still addition of NFIA.
Which subject and chapter does this question cover?
This is a Class 12 Economics question. Chapter: National Income and Related Aggregates. Topic: Aggregates related to national income - GNP.
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