GDP differs from GNP because
A)GDP = GNP - net factor payments from abroad.
B)GNP = GDP - net factor payments from abroad.
C)GDP = GNP - capital consumption allowances.
D)GNP = GDP - capital consumption allowances.

Question

Quizplus · Accepted Answer

GDP (Gross Domestic Product) and GNP (Gross National Product) differ in terms of geographic and citizenship considerations. GDP measures the value of goods and services produced within a country's borders, regardless of who produces them, while GNP measures the value of goods and services produced by the citizens of a country, regardless of where they produce them. Therefore, GNP can be expressed as GDP plus net factor payments from abroad, which are the income residents receive from abroad for factor services (interest, dividends, etc.) minus the income paid to foreign residents for factor services. This makes option A correct, as it accurately reflects the relationship between GDP and GNP by indicating that GDP equals GNP minus net factor payments from abroad, implying that to find GDP from GNP, you subtract the net income residents receive from abroad.

GDP Differs from GNP Because