Which measure includes the value of goods and services produced by a country’s residents abroad?

• A. GDP
• B. GNP
• C. CPI
• D. Balance of trade

Answer: (B)

The key idea is whether we count production by a country’s residents no matter where it happens. GNP does that: it includes the value of goods and services produced by the country’s residents abroad. So if residents own factories in another country, the output from those factories is added to their nation’s GNP. GDP, by contrast, counts production that occurs within the country’s borders, regardless of who owns the production. If a production facility sits in another country, its output would boost that country’s GDP, not the residents’ GNP. The other options don’t fit because they measure price changes (CPI) or net trade flows (balance of trade), not production by residents abroad.