CFA® Level 1: CFA® Level 1

Which of the following is true?

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A. GDP = GNP + (income of citizens received for factors of production supplied abroad) - (income paid to foreigners for their contribution to domestic output)

B. The GDP is always larger than GNP since it includes the output produced by foreign nationals living in the country.

C. The GNP is always larger than GDP since it includes the income by the country's citizens living abroad.

D. GNP = GDP + (income of citizens received for factors of production supplied abroad) - (income paid to foreigners for their contribution to domestic output).

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Explanations

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A. B. C. D.

GNP measures the productive value generated by the labor and capital owned by the citizens of a country, regardless of whether those citizens and assets reside within the country or out of it. Hence, while calculating GNP, the income generated by foreign nationals residing in the country as well as by assets owned by foreign nationals is excluded. On the other hand, GDP measures the productive activity within the country, regardless of who produces it.

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