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).