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CA Foundation · Business Economics · Determination of National Income

Which of the following correctly describes Gross National Product (GNP) at market prices?

GNP at market prices equals GDP at market prices plus net factor income from abroad. GNP counts output of a country's residents wherever they earn it, so income earned abroad is added and income paid to foreigners within the country is deducted.

  1. AGDP at market prices plus net factor income from abroadCorrect
  2. BGDP at market prices minus net factor income from abroad
  3. CGDP at market prices minus depreciation
  4. DGDP at market prices plus subsidies minus indirect taxes

Explanation

GNP is the value of output produced by the residents of a country, wherever located. It is obtained by adding net factor income from abroad (factor income received from abroad minus factor income paid abroad) to GDP. Option B reverses the sign of the adjustment. Option C describes a step toward net product, not GNP.

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