GNP equals GDP ______ income earned domestically by foreigners ______ income that nationals earn abroad.

Question

BlackTom AI · Accepted Answer

First, the question asks about the relationship between GDP and GNP, with two blanks to fill: one for domestically earned income by foreigners, and one for income that nationals earn abroad.
Option A: "plus; plus" would imply GNP = GDP + income earned domestically by foreigners + income that nationals earn abroad. This is incorrect because GNP adds abroad earnings and subtracts foreigners' earnings domestically; simply adding both would double count and misstate the net flow of income across borders.
Option B: "minus; minus" would give GNP = GDP - income earned domestically by foreigners - income that nationals earn abroad. This is illogical because it would reduce GNP by both foreign-earned income domestically and nationals’ foreign earnings, which does not align with the standard national income accounting identity.
Option C: "minus; plus" aligns with the standard definition: GNP = GDP − income earned domestically by foreigners + income that nationals earn abroad. This captures the idea that income earned by foreigners within the country is a leakage from the domestic economy to foreigners, lowering GNP relative to GDP, while income earned by nationals abroad represents income coming back to the nation, increasing GNP.
Option D: "plus; minus" would yield GNP = GDP + income earned domestically by foreigners − income that nationals earn abroad. This reverses the correct flow, implying foreigners’ domestic earnings increase GNP and nationals’ foreign earnings decrease it, which contradicts the conventional accounting framework.
In summary, the reasoning hinges on recognizing that GNP adjusts GDP by adding residents’ income from abroad and subtracting nonresidents’ income earned domestically. The option that mirrors that structure is "minus; plus."

BU.220.610.51.FA25 M1 Practice Quiz- Requires Respondus LockDown Browser

GNP equals GDP income earned domestically by foreigners income that nationals earn abroad.

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