Consider the following statements regarding 'Gross Domestic Product (GDP)': 1. It measures the aggregate value of final goods and services produced within the domestic territory. 2. It includes income earned by citizens working abroad. 3. It excludes the contribution of foreign companies operating within the country. Which of the statements given above is/are correct?

Correct Option The correct option is 1 only Explanation Gross Domestic Product (GDP) is the standard measure of the value added created through the production of goods and services in a country during a certain period. It is fundamentally a territorial concept, focusing on the geographic location of economic activity rather than the nationality of the entities involved. Statement-wise Analysis - Statement 1 is Correct: GDP measures the monetary value of all final goods and services produced within the domestic territory of a country during a specific time period (usually a year). The defining criterion is the boundary of the nation. - Statement 2 is Incorrect: Income earned by citizens working abroad is excluded from GDP. This component is part of Gross National Product (GNP), which accounts for the income of nationals regardless of location. GDP focuses solely on production within the country's borders. - Statement 3 is Incorrect: GDP includes the contribution of foreign companies operating within the country. Since GDP is a measure of production within the domestic territory, the ownership of the company (whether domestic or foreign) is irrelevant; if the economic activity occurs within the borders, it is counted in the GDP. Key Takeaway: The primary distinction between GDP and GNP is that GDP is based on geography (where production takes place), while GNP is based on citizenship/ownership (who produces it).

NCERT Class 12 Economics — Chapter 4: National Income Accounting

mcqmedium

Consider the following statements regarding 'Gross Domestic Product (GDP)':

It measures the aggregate value of final goods and services produced within the domestic territory.
It includes income earned by citizens working abroad.
It excludes the contribution of foreign companies operating within the country.

Which of the statements given above is/are correct?

Official previous-year question

Verified 1 Aug 2026.

Options

A1, 2 and 3
B1 and 3 only
C1 only
D2 only

Did you get this right?

Solution

Correct Option

The correct option is

1 only

Explanation

Gross Domestic Product (GDP) is the standard measure of the value added created through the production of goods and services in a country during a certain period. It is fundamentally a territorial concept, focusing on the geographic location of economic activity rather than the nationality of the entities involved.

Statement-wise Analysis

Statement 1 is Correct: GDP measures the monetary value of all final goods and services produced within the domestic territory of a country during a specific time period (usually a year). The defining criterion is the boundary of the nation.
Statement 2 is Incorrect: Income earned by citizens working abroad is excluded from GDP. This component is part of Gross National Product (GNP), which accounts for the income of nationals regardless of location. GDP focuses solely on production within the country's borders.
Statement 3 is Incorrect: GDP includes the contribution of foreign companies operating within the country. Since GDP is a measure of production within the domestic territory, the ownership of the company (whether domestic or foreign) is irrelevant; if the economic activity occurs within the borders, it is counted in the GDP.

Key Takeaway: The primary distinction between GDP and GNP is that GDP is based on geography (where production takes place), while GNP is based on citizenship/ownership (who produces it).

Your note

More from Chapter 4: National Income Accounting

In the context of National Income aggregates, what does 'Private Income' include that 'Personal Income' does not?

hard

Consider the following statements regarding 'Nominal GDP' and 'Real GDP': 1. Nominal GDP is evaluated at current prevailing prices. 2. Real GDP is evaluated at current market prices. 3. If Real GDP changes, it implies a change in prices only. Which of the statements given above is/are correct?

easy

Which of the following is NOT a reason for the difference between CPI and GDP Deflator?

easy

What is the primary reason for deducting 'Imports' in the expenditure method of calculating GDP?

medium

easy

Keep practising Chapter 4: National Income Accounting

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Correct Option

The correct option is

1 only

Explanation

Statement-wise Analysis

Statement 1 is Correct: GDP measures the monetary value of all final goods and services produced within the domestic territory of a country during a specific time period (usually a year). The defining criterion is the boundary of the nation.
Statement 2 is Incorrect: Income earned by citizens working abroad is excluded from GDP. This component is part of Gross National Product (GNP), which accounts for the income of nationals regardless of location. GDP focuses solely on production within the country's borders.
Statement 3 is Incorrect: GDP includes the contribution of foreign companies operating within the country. Since GDP is a measure of production within the domestic territory, the ownership of the company (whether domestic or foreign) is irrelevant; if the economic activity occurs within the borders, it is counted in the GDP.

Key Takeaway: The primary distinction between GDP and GNP is that GDP is based on geography (where production takes place), while GNP is based on citizenship/ownership (who produces it).