How is wage income earned abroad by an Indian resident treated while calculating India’s Gross National Product (GNP)?
Answer and explanation
Correct answer: It is included in India’s GNP because it is part of factor income received from abroad
GNP is based on the income of a country’s normal residents, whereas GDP is based on production within the country’s domestic territory. Wages earned abroad by an Indian resident are factor income received from abroad and therefore contribute positively to India’s NFIA. They are added when moving from GDP to GNP: GNP = GDP + NFIA. The location of production matters for GDP, but the residence of the income earner matters for GNP.
Frequently asked questions
What is the correct answer to this question?
It is included in India’s GNP because it is part of factor income received from abroad
Why is this the correct answer?
GNP is based on the income of a country’s normal residents, whereas GDP is based on production within the country’s domestic territory. Wages earned abroad by an Indian resident are factor income received from abroad and therefore contribute positively to India’s NFIA. They are added when moving from GDP to GNP: GNP = GDP + NFIA. The location of production matters for GDP, but the residence of the income earner matters for GNP.
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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