What is the role of net factor income from abroad (NFIA) in calculating Gross National Product (GNP)?
Answer and explanation
Correct answer: It is added to GDP
GNP measures the value of production attributable to a country’s normal residents, whereas GDP measures production within the domestic territory. Therefore, income earned by residents from abroad is added and income paid to foreign factors is deducted through NFIA. The formula is GNP = GDP + NFIA, so option A is correct.
Frequently asked questions
What is the correct answer to this question?
It is added to GDP
Why is this the correct answer?
GNP measures the value of production attributable to a country’s normal residents, whereas GDP measures production within the domestic territory. Therefore, income earned by residents from abroad is added and income paid to foreign factors is deducted through NFIA. The formula is GNP = GDP + NFIA, so option A is correct.
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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