What is a major limitation of using GNP as an economic indicator?

The use of Gross National Product (GNP) as an economic indicator has limitations, and one of the major criticisms is its inclusion of income from foreign investments. GNP measures the total economic output produced by a nation's residents, regardless of where that production takes place, which means it accounts not only for domestic activities but also for income generated by nationals from investments abroad.

This aspect can skew the understanding of an economy’s health, especially if a significant portion of income is derived from foreign sources rather than domestic economic activity. Therefore, when GNP emphasizes income produced outside the country, it might give a misleading representation of the actual economic conditions or well-being of the local economy.

In contrast, other options, while relevant in discussions of GNP's efficacy as an indicator, do not encapsulate this specific limitation regarding the global versus local economic activity consideration that profoundly affects the measure of an economy’s performance.