Which measure takes account of net income earned overseas?

• A. GDP
• B. GNP
• C. Gross Value Added
• D. Net Domestic Income

Answer: (B)

Income earned from outside a country is reflected in national income by adjusting for cross-border factor incomes. GDP counts all production that occurs within the country’s borders, regardless of who owns the firms, so it doesn’t specifically track residents’ earnings from overseas. GNP, on the other hand, starts from domestic production but adds the net income residents earn abroad and subtracts the income foreigners earn domestically. This net factor income from abroad captures the earnings of residents from overseas, making GNP the measure that accounts for net income earned overseas. If residents earn more abroad than foreigners earn domestically, GNP will be higher than GDP; if the opposite, GDP will be higher. Gross Value Added is a production-based sum that feeds into GDP but doesn’t separately account for overseas earnings, and Net Domestic Income focuses on domestic income flows without the overseas adjustment.