Question:medium

Which of the following is the correct relationship between Gross Domestic product (GDP), Gross National Product (GNP), Net Income Receipt (X), and Net Outflow to the foreign Assets (Y)?

Show Hint

GNP = GDP + net factor income from abroad (income received minus outflow).
Updated On: Oct 1, 2026
  • GNP = GDP - X + Y
  • GNP = GDP + X - Y
  • GDP - X = GNP + Y
  • GDP + Y = GNP - X
Show Solution

The Correct Option is B

Solution and Explanation

Step 1: Concept:
Think of GDP as the money earned on the land of the country. Citizens who work or invest abroad send money home. Foreigners who work or invest here send money out.

Step 2: Build GNP from pieces.
Start with GDP. Add what comes in, which is X. Take away what goes out, which is Y. The result is the income that belongs to the nationals, which is GNP.

Step 3: Test with numbers.
Let GDP be 100, X be 10 and Y be 4. Then GNP is $100 + 10 - 4 = 106$. Nationals gained 6 net, so GNP is larger than GDP. This is sensible.

Step 4: Test option 1 with the same numbers.
$100 - 10 + 4 = 94$. This says that nationals lost 6 net, which does not fit the data. So option 1 fails.

Step 5: Test option 3.
From GDP - X = GNP + Y we get GNP = $100 - 10 - 4 = 86$. This is far too low. So option 3 fails.

Step 6: Test option 4.
From GDP + Y = GNP - X we get GNP = $100 + 4 + 10 = 114$. This counts the outflow as income, which is wrong. So option 4 fails.

Step 7: Confirm option 2.
It gives 106, the value we built from the definition. So option 2 is the right relation.

Final Answer:
Option 2 is correct. \[ \boxed{GNP = GDP + X - Y} \]
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