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Exercises · Q1

Q.Which of the following correctly defines Gross Domestic Product (GDP)?

(a) Money value of final goods and services produced by a country's residents anywhere in the world
(b) Money value of final goods and services produced within the domestic territory of a country in a year
(c) Money value of final goods and services produced within the domestic territory, net of depreciation
(d) National Income minus Net Factor Income from Abroad
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Option (a) describes GNP, not GDP — GNP is defined by residency of the producer, not location of production. Option (b) is exactly the textbook definition of GDP: the money value of all final goods and services produced within the domestic territory of a country during a year, whether the producing factors are owned by residents or non-residents. Option (c) describes NDP (GDP minus depreciation), not GDP itself — GDP is a gross concept, so depreciation is not deducted. Option (d) is backwards: GNP=GDP+NFIAGNP = GDP + NFIA, so GDP=GNP−NFIAGDP = GNP - NFIA, not "National Income minus NFIA" — and National Income (NNP at factor cost) is a different, further-adjusted aggregate altogether.

✓Final answer

(b) — Money value of final goods and services produced within the domestic territory of a country in a year.

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