Which of the following identity is correct regarding GNP?
Show answer & explanation
Correct answer: C
Explanation
The correct answer is option 3 i.e. 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.
The correct identity regarding GNP (Gross National Product) is:
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.
This formula adjusts GDP by adding the income earned by domestic residents from abroad and subtracting the income earned by foreign residents within the domestic economy, reflecting the total income earned by a country's residents.