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Difficulty: MediumBasic National Income Aggregates (GDP, GNP, NNP, NDP)

A central bank's statistical bulletin highlights that a country recorded a Gross National Product (GNP\text{GNP}) of N9,500 million\text{N}9,500\text{ million}, a Net Domestic Product (NDP\text{NDP}) of N8,100 million\text{N}8,100\text{ million}, and a Capital Consumption Allowance (depreciation) of N600 million\text{N}600\text{ million} in a given fiscal year. What is the value of the Net Factor Income from Abroad (NFIA\text{NFIA})?

  1. N800 million\text{N}800\text{ million}Answer
  2. B
    N1,400 million\text{N}1,400\text{ million}
  3. C
    N2,000 million\text{N}2,000\text{ million}
  4. D
    N600 million\text{N}600\text{ million}

Answer

N800 million\text{N}800\text{ million}
To find Net Factor Income from Abroad (NFIA\text{NFIA}), we use the core identities of national income accounting. First, Gross Domestic Product (GDP\text{GDP}) is derived by adding depreciation (Capital Consumption Allowance) to Net Domestic Product (NDP\text{NDP}): GDP=N8,100 million+N600 million=N8,700 million\text{GDP} = \text{N}8,100\text{ million} + \text{N}600\text{ million} = \text{N}8,700\text{ million}. Next, Gross National Product (GNP\text{GNP}) is related to GDP\text{GDP} by the formula GNP=GDP+NFIA\text{GNP} = \text{GDP} + \text{NFIA}. Rearranging for NFIA\text{NFIA} gives NFIA=GNP−GDP=N9,500 million−N8,700 million=N800 million\text{NFIA} = \text{GNP} - \text{GDP} = \text{N}9,500\text{ million} - \text{N}8,700\text{ million} = \text{N}800\text{ million}.

Step-by-Step Solution

1
Calculate Gross Domestic Product (GDP\text{GDP}) from Net Domestic Product (NDP\text{NDP}) and Capital Consumption Allowance.
GDP=NDP+Depreciation=N8,100 million+N600 million=N8,700 million\text{GDP} = \text{NDP} + \text{Depreciation} = \text{N}8,100\text{ million} + \text{N}600\text{ million} = \text{N}8,700\text{ million}
Gross aggregates include depreciation, while net aggregates exclude depreciation.
2
Calculate Net Factor Income from Abroad (NFIA\text{NFIA}) using the identity relating GNP\text{GNP} and GDP\text{GDP}.
NFIA=GNP−GDP=N9,500 million−N8,700 million=N800 million\text{NFIA} = \text{GNP} - \text{GDP} = \text{N}9,500\text{ million} - \text{N}8,700\text{ million} = \text{N}800\text{ million}
GNP\text{GNP} is equal to GDP\text{GDP} plus Net Factor Income from Abroad.

Key Concept

Basic National Income Aggregates Conversions (GDP, GNP, NDP)
Estimated Time:1m 30s
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Topics

Basic National Income Aggregates (GDP, GNP, NNP, NDP)

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