Which of the following correctly states the relationship between GDP and GNP for the U.S.?
A) GDP equals GNP minus the net income of foreigners.
B) GDP equals GNP plus the net income of foreigners.
C) GDP equals GNP minus indirect business taxes.
D) GDP equals GNP.

Question

Quizplus · Accepted Answer

GDP measures the total output of goods and services within a country's borders, regardless of who owns the factors of production. GNP measures the total income earned by a country's residents, regardless of where they are located. Therefore, to account for the income earned by foreign residents and businesses within the U.S., we need to add net income received from abroad to the GNP, which results in GDP being equal to GNP plus net income received from abroad.

Which of the Following Correctly States the Relationship Between GDP