Which statement accurately describes the difference between GDP and GNI?

Which statement accurately describes the difference between GDP and GNI?

• A. GDP and GNI are the same.
• B. GNI excludes income earned by residents abroad.
• C. GDP measures value of goods/services produced domestically; GNI includes residents' income from abroad.
• D. GDP measures the value of all transactions within the country’s borders.

Answer: (C)

The difference lies in what each measure counts: where production happens versus who benefits from income. GDP sums up the value of all final goods and services produced within a country’s borders, regardless of who owns the firms. GNI, on the other hand, starts with that domestic production and then adds the income residents earn abroad while subtracting the income foreigners earn domestically, so it reflects the total income available to a country’s residents from both domestic and international sources. That’s why the accurate description is that GDP measures domestic production, while GNI includes residents’ income from abroad. The other statements mix up location of production or who counts as income, which isn’t how these measures work.

The difference lies in what each measure counts: where production happens versus who benefits from income. GDP sums up the value of all final goods and services produced within a country’s borders, regardless of who owns the firms. GNI, on the other hand, starts with that domestic production and then adds the income residents earn abroad while subtracting the income foreigners earn domestically, so it reflects the total income available to a country’s residents from both domestic and international sources. That’s why the accurate description is that GDP measures domestic production, while GNI includes residents’ income from abroad. The other statements mix up location of production or who counts as income, which isn’t how these measures work.