The national income statistics for the Republic of Eldoria in a given fiscal year record t… — JAMB UTME

The national income statistics for the Republic of Eldoria in a given fiscal year record the following expenditure components (in millions of dollars):

- Household Consumption Expenditure ( $C$ ): $\$420$
- Gross Private Domestic Investment ( $I$ ): $\$150$
- Government Final Expenditure ( $G$ ): $\$180$
- Export Revenues ( $X$ ): $\$85$
- Import Expenditures ( $M$ ): $\$95$
- Net Factor Income Paid to Abroad: $\$15$

What is Eldoria's Gross National Product ( $GNP$ ) at market prices?

$\$725$ millionAnswer
B
$\$740$ million
C
$\$755$ million
D
$\$915$ million

Answer

The Gross National Product (GNP) at market prices is

\$725

million.

The expenditure approach defines

GDP = C + I + G + (X - M)

. Substituting the given figures gives

GDP = 420 + 150 + 180 + (85 - 95) = 740

million dollars. To find

GNP

, net factor income from abroad is added. Since net factor income was paid to abroad (an outflow of 15 million dollars),

NFIA = -15

million dollars. Therefore,

GNP = 740 - 15 = 725

million dollars.

Step-by-Step Solution

Calculate Gross Domestic Product (GDP) using the expenditure formula:

GDP = C + I + G + (X - M)

GDP = 420 + 150 + 180 + (85 - 95) = 750 + (-10) = \$740

million

The expenditure approach sums consumption, investment, government spending, and net exports (exports minus imports).

Determine Net Factor Income from Abroad (NFIA)

Since net factor income is paid to abroad (outflow),

NFIA = -\$15

million

Factor income flowing out of the domestic economy reduces the national income earned by citizens.

Convert GDP to GNP using the relation:

GNP = GDP + NFIA

GNP = 740 + (-15) = \$725

million

Gross National Product measures total output created by residents of a country, regardless of location.

Key Concept

Expenditure Method of National Income Accounting

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