Question

If a country's gross domestic product is greater than its gross national product, then what would be the net factor income earned from abroad?

• A. Negative
• B. Positive
• C. Zero
• D. None of these

Hint:

When GDP exceeds GNP, it indicates that the net factor income from abroad is negative.

Answer 1

The Correct Option is A

Step 1: Understanding GDP and GNP.
Gross Domestic Product (GDP) refers to the total value of all goods and services produced within a country's borders, while Gross National Product (GNP) includes GDP plus the net income from abroad (income earned by residents abroad minus income earned by foreigners in the country).

Step 2: Analyzing the relationship.
If GDP is greater than GNP, it implies that the country is a net importer of factor income, i.e., foreign income earned in the country exceeds the income its residents earn abroad. This results in a negative net factor income.

Step 3: Conclusion.
The correct answer is (A) Negative, as a higher GDP compared to GNP indicates that the country is receiving less income from abroad than it is sending abroad.