If NFIA is negative, what happens while deriving GNP from GDP?
Answer and explanation
Correct answer: GNP will be less than GDP
The formula is GNP = GDP + NFIA. When NFIA is negative, adding it reduces the value of GDP; for example, GDP + (−₹20 crore) equals GDP − ₹20 crore. Consequently, GNP is less than GDP. GNP would equal GDP only when NFIA is zero, and it would exceed GDP only when NFIA is positive.
Frequently asked questions
What is the correct answer to this question?
GNP will be less than GDP
Why is this the correct answer?
The formula is GNP = GDP + NFIA. When NFIA is negative, adding it reduces the value of GDP; for example, GDP + (−₹20 crore) equals GDP − ₹20 crore. Consequently, GNP is less than GDP. GNP would equal GDP only when NFIA is zero, and it would exceed GDP only when NFIA is positive.
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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