Can you explain the answer of this question below:Which of the followi...
Gross national product (GNP) is a slightly modified version of gross domestic product (GDP). The GNP of a country is equal to the value of all goods and services produced by the nationals within an economy, plus the value of total imported goods and services less the total exported goods and services. GDP is considered more accurate when considering the geographic borders of an economy, while GNP accounts for all nationals or citizens of a given economy.
Per capita income, also known as income per person, is the mean income of the people in an economic unit such as a country or city. It is calculated by taking a measure of all sources of income in the aggregate (such as GDP or Gross national income) and dividing it by the total population.
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Can you explain the answer of this question below:Which of the followi...
Introduction:
The Gross National Product (GNP) is a measure of the total value of all final goods and services produced by the residents of a country in a given period of time. It includes both domestic and foreign production. While computing GNP, certain factors need to be considered. This question asks which of the following factors is not required in the computation of GNP.
Explanation:
1. Net Foreign Investment:
- Net foreign investment refers to the difference between the amount of investment made by foreigners in a country and the amount of investment made by residents of the country in foreign economies.
- It is an important component of GNP as it reflects the flow of funds between the domestic and foreign economies.
- Net foreign investment is included in the computation of GNP as it represents the income earned by residents from their investments abroad.
2. Private Investment:
- Private investment refers to the investment made by individuals and firms in the country.
- It includes investments in capital goods, such as machinery and equipment, which contribute to the production of goods and services.
- Private investment is an essential component of GNP as it represents the productive capacity of the economy.
3. Per Capita Income of Citizens:
- Per capita income refers to the average income earned by each citizen of a country.
- While per capita income is a useful measure of the standard of living, it is not directly required in the computation of GNP.
- GNP is calculated by summing up the incomes earned by all the residents of a country, regardless of their individual incomes.
- Therefore, per capita income is not a necessary factor in the computation of GNP.
4. Purchase of Goods by Government:
- The purchase of goods by the government refers to the expenditure made by the government on goods and services.
- It includes government spending on infrastructure, defense, public services, etc.
- The purchase of goods by the government is an important component of GNP as it represents the government's contribution to the economy.
Conclusion:
In conclusion, while computing GNP, factors such as net foreign investment, private investment, and the purchase of goods by the government are considered. However, the per capita income of citizens is not required in the computation of GNP. Per capita income is a measure of the average income earned by each citizen and does not directly contribute to the total value of goods and services produced by the residents of a country.