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SSC Micro Macro Economics P-I QUESTION #1685
Question 1
A country where residents make large net factor income payments to foreign investors would be expected to have a GDP that is:
  • Larger than its GNP✔️
  • Smaller than its GNP
  • Equal to its GNP plus net exports
  • Unrelated to its GNP in any systematic way
Correct Answer Explanation
GNP = GDP + Net Factor Income from Abroad (NFIA). If a country makes large net income payments to foreign investors, NFIA is negative, meaning GNP < GDP. Rearranging: GDP = GNP − NFIA = GNP + net payments abroad. Therefore GDP > GNP. This is common in countries with high foreign ownership of domestic capital, like some developing nations.