Which measure includes income earned by residents abroad?

Which measure includes income earned by residents abroad?

• A. GDP
• B. CPI
• C. GNP
• D. PPI

Answer: (C)

This question tests how different measures treat where production and ownership occur. GDP counts the value of goods and services produced within a country’s borders, regardless of who owns the resources. Gross National Product, on the other hand, reflects the value produced by the country’s residents, wherever that production happens, so it includes income residents earn abroad and excludes income foreigners earn domestically. That is why income earned by residents abroad is included in Gross National Product. By contrast, price measures like the CPI or PPI focus on price levels, not national income from abroad, so they don’t capture this income flow. In practice, GNP equals GDP plus net factor income from abroad.

This question tests how different measures treat where production and ownership occur. GDP counts the value of goods and services produced within a country’s borders, regardless of who owns the resources. Gross National Product, on the other hand, reflects the value produced by the country’s residents, wherever that production happens, so it includes income residents earn abroad and excludes income foreigners earn domestically. That is why income earned by residents abroad is included in Gross National Product. By contrast, price measures like the CPI or PPI focus on price levels, not national income from abroad, so they don’t capture this income flow. In practice, GNP equals GDP plus net factor income from abroad.