Consider the following statements: The measurements of Gross Domestic Product (GDP) and Gross National Product (GNP) differ by net factor income from abroad. Net National Product is calculated by deducting depreciation from the Gross National Product. Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer?

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Consider the following statements:

The measurements of Gross Domestic Product (GDP) and Gross National Product (GNP) differ by net factor income from abroad.

Net National Product is calculated by deducting depreciation from the Gross National Product.

Which of the statements given above is/are correct?

a)
1 only
b)
2 only
c)
Both 1 and 2
d)
Neither 1 nor 2

Correct answer is option 'C'. Can you explain this answer?

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Consider the following statements: The measurements of Gross Domest...

Gross domestic product (GDP) and Gross national product (GNP) are both widely used measures of a country's aggregate economic output.
Gross domestic product (GDP) is the value of a nation's finished domestic goods and services during a specific time period. GDP measures the value of goods and services produced within a country's borders, by citizens and non-citizens alike. GNP measures the value of goods and services produced by only a country's citizens but both domestically and abroad. Therefore GNP is defined as follows
- 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.
- Hence, GNP ≡ GDP + Net factor income from abroad. Hence statement 1 is correct.
A part of the country's capital gets consumed during the year due to wear and tear. This wear and tear are called depreciation. Naturally, depreciation does not become part of anybody’s income. If we deduct depreciation from GNP the measure of aggregate income that we obtain is called Net National Product (NNP). Thus
- NNP ≡ GNP – Depreciation. Hence statement 2 is correct.

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Consider the following statements: The measurements of Gross Domestic Product (GDP) and Gross National Product (GNP) differ by net factor income from abroad. Net National Product is calculated by deducting depreciation from the Gross National Product. Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer?

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