How does net foreign factor income affect the calculation of GDP, and why must it be adjusted?

• A. It affects GDP by decreasing government spending, which must be adjusted to reflect accurate national income.
• B. It affects GDP by altering the value of exports, which must be adjusted to reflect accurate trade balances.
• C. It affects GDP by including foreign income earned domestically and excluding domestic income earned abroad, ensuring GDP reflects domestic economic activity.
• D. It affects GDP by increasing the total value of imports, which must be adjusted to reflect true domestic production.

Answer: (C)