Question

What is GNP at factor cost?

Answer 1

GNP at factor cost refers to the total income earned by the normal residents of a country (both within the country and abroad) from the production of final goods and services in a year, measured at factor cost. 

GNP at FC = GDP at MP + net factor income from abroad − net indirect taxes

• It includes all factor incomes: wages, rent, interest, and profits.
• It covers production by nationals, whether it takes place inside or outside the country.
• It is measured at factor cost, so it excludes indirect taxes and includes subsidies.
• It is a gross measure, meaning depreciation is not deducted.