Grross National Product-GNP


 
 
Concept Explanation
 

Gross National Product - GNP

But the whole of it may not accrue to the citizens of the country. For example, a citizen of India working in United States may be earning her wage and it will be included in the United States GDP. But legally speaking, she is an Indian. When we try to compensate this, in order to maintain symmetry, we must deduct the earnings of the foreigners who are working within our domestic economy, or the payments to the factors of production owned by the foreigners. For example, the profits earned by the Korean - owned Hyundai car factory will have to be subtracted from the GDP of India. The macroeconomic variable which takes into account such additions and subtractions is known as Gross National Product (GNP). It is,therefore, defined as follows.

GNP = GDP + Factor income earned by the domestic factors of production employed in the rest of the world - Factor income earned by the factors of production o the rest of the world employed in the domestic economy.

Hence,

GNP = GDP + Net factor income from abroad

Sample Questions
(More Questions for each concept available in Login)
Question : 1

When depreciation is subtracted from GDP, it is called ____________

Right Option : C
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