With reference to the concepts of Gross Domestic Product (GDP) and Gross National Product (GNP), consider the following statements: 1. GNP is calculated by deducting the value of exports from the GDP. 2. GDP is the total money value of all final goods and services produced in a country in a year. 3. The net earning from foreign transactions is always positive for a developing country like India. Which of the statements given above is/are correct?

Correct Option The correct option is 2 only Explanation National Income Accounting measures the economic activity of a country. The two primary aggregates are Gross Domestic Product (GDP), which focuses on production within the domestic territory, and Gross National Product (GNP), which focuses on the income generated by the normal residents of a country, regardless of where they are located. Statement-wise Analysis - Statement 1 is Incorrect: Gross Domestic Product (GDP) is defined as the total monetary value of all final goods and services produced within the domestic territory of a country during a specific period, usually one year. It focuses on the geography of production. - Statement 2 is Correct: Gross National Product (GNP) is derived by adjusting GDP for Net Factor Income from Abroad (NFIA), not by deducting exports. The formula is: GNP = GDP + Net Factor Income from Abroad. Exports are already included in the calculation of GDP (under the expenditure method: C + I + G + X - M). Deducting exports is not the method to transition from GDP to GNP. - Statement 3 is Incorrect: The "net earning from foreign transactions" in the context of GNP refers to Net Factor Income from Abroad (NFIA). This is the difference between income earned by domestic factors of production abroad and income earned by foreign factors within the domestic economy. For developing countries like India, NFIA is often negative due to significant outflows in the form of interest payments on foreign debt and returns on foreign investment. It is factually incorrect to state it is "always positive." Key Takeaway Key Takeaway: The fundamental difference between GDP and GNP is Net Factor Income from Abroad (NFIA). GDP is a territorial concept (where production happens), while GNP is a national concept (who owns the factors of production).

NCERT Class 11 Economics — Chapter 7: Employment: Growth, Informalisation and Other Issues

mcqeasy

With reference to the concepts of Gross Domestic Product (GDP) and Gross National Product (GNP), consider the following statements:

GNP is calculated by deducting the value of exports from the GDP.
GDP is the total money value of all final goods and services produced in a country in a year.
The net earning from foreign transactions is always positive for a developing country like India.

Which of the statements given above is/are correct?

Official previous-year question

Verified 1 Aug 2026.

Options

A2 only
B1 and 3 only
C1, 2 and 3
D1 only

Did you get this right?

Solution

Correct Option

The correct option is

2 only

Explanation

National Income Accounting measures the economic activity of a country. The two primary aggregates are Gross Domestic Product (GDP), which focuses on production within the domestic territory, and Gross National Product (GNP), which focuses on the income generated by the normal residents of a country, regardless of where they are located.

Statement-wise Analysis

Statement 1 is Incorrect: Gross Domestic Product (GDP) is defined as the total monetary value of all final goods and services produced within the domestic territory of a country during a specific period, usually one year. It focuses on the geography of production.
Statement 2 is Correct: Gross National Product (GNP) is derived by adjusting GDP for Net Factor Income from Abroad (NFIA), not by deducting exports. The formula is:
GNP = GDP + Net Factor Income from Abroad.
Exports are already included in the calculation of GDP (under the expenditure method: C + I + G + X - M). Deducting exports is not the method to transition from GDP to GNP.
Statement 3 is Incorrect: The "net earning from foreign transactions" in the context of GNP refers to Net Factor Income from Abroad (NFIA). This is the difference between income earned by domestic factors of production abroad and income earned by foreign factors within the domestic economy. For developing countries like India, NFIA is often negative due to significant outflows in the form of interest payments on foreign debt and returns on foreign investment. It is factually incorrect to state it is "always positive."

Key Takeaway

Key Takeaway: The fundamental difference between GDP and GNP is Net Factor Income from Abroad (NFIA). GDP is a territorial concept (where production happens), while GNP is a national concept (who owns the factors of production).

Your note

More from Chapter 7: Employment: Growth, Informalisation and Other Issues

With reference to the definition of ‘workers’ in the Indian economy, consider the following statements: 1. Self-employed individuals are considered workers in the Indian economy. 2. A person temporarily abstaining from work due to illness is excluded from the worker category. 3. Those who help main workers in economic activities without receiving direct payment are included in the category of workers. Which of the statements given above is/are correct?

medium

Consider the following statements regarding the ‘Worker-Population Ratio’ in India: 1. It is defined as the total population divided by the number of workers. 2. The worker-population ratio is generally higher in rural areas compared to urban areas. 3. A higher ratio indicates that a greater proportion of the population is actively contributing to the production of goods and services. Which of the statements given above is/are correct?

medium

Consider the following statements regarding the participation of women in the workforce in India: 1. Women constitute the majority of the workforce in rural India. 2. The worker-population ratio for women is significantly higher in urban areas than in rural areas. 3. Many household activities performed by women are not recognised as productive work, leading to an underestimation of women workers. Which of the statements given above is/are correct?

medium

The term "Squatters" in the context of the informal sector refers to:

easy

With reference to the definition of unemployment by the National Statistical Office (NSO), consider the following statements: 1. It includes those who are not working due to lack of work. 2. It excludes those who seek work through employment exchanges. 3. It includes those who express their willingness for work under prevailing conditions. Which of the statements given above is/are correct?

medium

Keep practising Chapter 7: Employment: Growth, Informalisation and Other Issues

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Correct Option

The correct option is

2 only

Explanation

Statement-wise Analysis

Statement 1 is Incorrect: Gross Domestic Product (GDP) is defined as the total monetary value of all final goods and services produced within the domestic territory of a country during a specific period, usually one year. It focuses on the geography of production.
Statement 2 is Correct: Gross National Product (GNP) is derived by adjusting GDP for Net Factor Income from Abroad (NFIA), not by deducting exports. The formula is:
GNP = GDP + Net Factor Income from Abroad.
Exports are already included in the calculation of GDP (under the expenditure method: C + I + G + X - M). Deducting exports is not the method to transition from GDP to GNP.
Statement 3 is Incorrect: The "net earning from foreign transactions" in the context of GNP refers to Net Factor Income from Abroad (NFIA). This is the difference between income earned by domestic factors of production abroad and income earned by foreign factors within the domestic economy. For developing countries like India, NFIA is often negative due to significant outflows in the form of interest payments on foreign debt and returns on foreign investment. It is factually incorrect to state it is "always positive."