With reference to Gross National Product GNP consider the following statements 1 It represents the m...........

Economic Affairs Growth and Indicators

With reference to Gross National Product (GNP), consider the following statements:

1. It represents the monetary value of all goods and services produced within a nation's geographic borders over a specified period of time.

2. It is always greater than Gross domestic product.

Which of the statements given above is/are correct?

1 only

2 only

Both 1 and 2

Neither 1 nor 2

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Explanation:

Gross Domestic Product measures the aggregate production of final goods and services taking place within the domestic economy during a year.

GNP takes into account the economic activities performed by its citizens outside the geographic borders of the country also.

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 of the rest of the world employed in the domestic economy Hence, GNP - GDP + Net factor income from abroad (Net factor income from abroad = Factor income earned by the domestic factors of production employed in the rest of the world - Factor income earned by the factors of production of the rest of the world employed in the domestic economy).

GNP can be greater than, equal to or lesser than the GDP depending on the magnitude of Net Income from abroad.