Concept:National Income Accounting distinguishes between GDP (domestic production) and GNP (income of residents). Only one of the given statements misapplies this distinction.
Explanation:Statement A: Imports are subtracted in GDP because GDP measures only goods and services produced within the country, not foreign spending.
Statement B: Net factor payments from abroad are
not included in GDP. They are part of GNP (Gross National Product), which adds income earned by residents abroad and subtracts income earned by foreigners domestically. Hence, this statement is incorrect.
Statement C: Second‑hand goods are excluded from GDP because they do not represent current production – including them would cause double counting.
Statement D: Inventories (unsold goods) are part of Gross Domestic Capital Formation, as they represent investment in production that has occurred but not yet been sold.
Answer:Statement B: “Net factor payments earned from abroad are included in Gross Domestic Product” is not correct.