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      Question

      The difference between GDP and GNP is due

      to:
      A Depreciation Correct Answer Incorrect Answer
      B Indirect taxes Correct Answer Incorrect Answer
      C Net factor income from abroad Correct Answer Incorrect Answer
      D Current transfers Correct Answer Incorrect Answer
      E Subsidies Correct Answer Incorrect Answer

      Solution

      GDP counts total production within domestic territory, regardless of who produces it. GNP adjusts for Net Factor Income from Abroad (NFIA) โ€”income earned by residents abroad minus income earned domestically by non-residents. Hence, GNP = GDP + NFIA. For India, NFIA is typically negative since more foreign capital earns income domestically than Indians earn abroad. ย 

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