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Which of the following statements regarding Gross National Product (GNP) is incorrect? 1. GNP is the gross domestic product of a country related to foreign income. 2. GNP includes income earned by citizens and companies abroad, but does not include income earned by foreigners within the country.

Which of the following statements regarding Gross National Product (GNP) is incorrect? 1. GNP is the gross domestic product of a country related to foreign income. 2. GNP includes income earned by citizens and companies abroad, but does not include income earned by foreigners within the country. Correct Answer 1 <span style="background-color: rgb(255, 255, 255);">Only </span>

The answer is neither 1 nor 2.

Key Points

  • The gross national product (GNP) is an estimate of the total worth of all final products and services produced in a particular time by means of production held by the citizens of a country.
  • It is generally computed by adding personal consumption expenditures, private domestic investment, government spending, net exports, and any income generated by citizens from overseas investments, less income earned inside the domestic economy by foreign residents.
  • GNP measures the total monetary value of the output produced by a country's residents.
  • Therefore, any output produced by foreign residents within the country's borders is excluded in calculations of GNP, while any output produced by the country's residents outside of its borders is counted.
  • GNP is related to the country's residents and not related to foreign income. Hence statement 1 is incorrect.
  • GNP includes income generated by citizens from overseas investments but does not include income earned by foreigners within the country. Hence statement 2 is also correct.

Related Questions

Consider the following statements and identify which of the following are true? While calculating GDP, income generated by foreigners in a country is taken into consideration While calculating GDP, income generated by nationals of a country outside the country is taken into account While calculating GNP, income generated by foreigners in a country is taken into consideration While calculating GNP, income generated by nationals of a country outside the country is taken into account
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