If GNP is $500 billion, receipts of factor income from the rest of the world are $15 billion, and payments of factor income to the rest of the world are $5 billion, then GDP is
A) $480 billion.
B) $490 billion.
C) $510 billion.
D) $520 billion.

Question

Quizplus · Accepted Answer

GNP (Gross National Product) = GDP (Gross Domestic Product) + Net Receipts of Income from Abroad

Net Receipts of Income from Abroad = Receipts of Factor Income from the Rest of the World - Payments of Factor Income to the Rest of the World

Therefore, GDP = GNP - Net Receipts of Income from Abroad

Substituting the given values:

500 billion = GDP + (15 billion - 5 billion)

500 billion = GDP + 10 billion

GDP = 500 billion - 10 billion

GDP = 490 billion

Therefore, the correct answer is B) $490 billion.

If GNP Is $500 Billion, Receipts of Factor Income from the Rest