GDP vs GNP: What's the Difference? Quiz and Flashcards

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Questions and Answers

What is the primary difference between GNP and GDP?

GDP includes the income of non-resident nationals, while GNP excludes it

GNP includes the income of resident nationals abroad, while GDP excludes it (correct)

GNP is calculated at factor cost, while GDP is at market prices

GDP is gross of depreciation, while GNP is net of depreciation

What is the formula to calculate NNP from GNP?

NNP = GNP - Depreciation (correct)

NNP = GNP / Depreciation

NNP = GNP + Depreciation

NNP = GNP × Depreciation

What is the effect of indirect taxes on market prices?

They have no effect on market prices

They make market prices equal to factor costs

They increase market prices (correct)

They reduce market prices

What is the formula to calculate NNP at factor cost?

NNP at Factor Cost = NNP at Market Prices + Subsidies - Indirect taxes Signup and view all the answers

What is the difference between national income and personal income?

National income is the total income of the country, while personal income is the income of an individual Signup and view all the answers

What is the difference between nominal and real GNP?

Nominal GNP is affected by changes in prices, while real GNP is not Signup and view all the answers

What is the main difference between GNP at market prices and NNP at market prices?

GNP at market prices includes depreciation, while NNP at market prices does not Signup and view all the answers

What is the primary difference between NNP at market prices and NNP at factor cost?

NNP at market prices is evaluated at market prices, while NNP at factor cost is evaluated at factor prices Signup and view all the answers

What is the formula to calculate personal income?

Personal Income = National Income - Undistributed Corporate Profits - Corporate Taxes - Social Security Contribution Signup and view all the answers

What is the primary difference between personal income and national income?

Personal income includes transfer payments, while national income does not Signup and view all the answers

What is the formula to calculate disposable income?

Disposable Income = Personal Income - Direct Taxes Signup and view all the answers

What is the difference between nominal GNP and real GNP?

Nominal GNP is the total value of final goods and services at current prices, while real GNP is the total value at constant prices Signup and view all the answers

What is the primary difference between Gross National Product (GNP) and Net National Product (NNP)?

GNP includes depreciation, while NNP excludes it Signup and view all the answers

Which of the following is a correct statement about Personal Income (PI)?

PI is the total income earned by individuals, including transfer payments Signup and view all the answers

What is the relationship between Disposable Income (DI) and Personal Income (PI)?

DI is less than PI, because it excludes taxes and other deductions Signup and view all the answers

Which of the following distinguishes between nominal and real Gross National Product (GNP)?

Nominal GNP is calculated in current prices, while real GNP is calculated in constant prices Signup and view all the answers

According to Fisher, what is the primary component of national income?

The services rendered by assets during the year Signup and view all the answers

What is the key difference between Gross National Product (GNP) and Gross Domestic Product (GDP)?

GNP includes all goods and services produced within the country, while GDP includes all goods and services produced by residents Signup and view all the answers

Study Notes

National Income Concepts

GNP (Gross National Product) is the total value of goods and services produced by the residents of a country, including income earned abroad, but excluding income earned by non-residents within the country.
GDP (Gross Domestic Product) is the total value of goods and services produced within the domestic territory of a country, including income earned by non-residents, but excluding income earned by residents abroad.

Difference between GNP and GDP

GNP includes income of resident nationals earned abroad and excludes income earned locally by non-nationals.
GDP includes income locally earned by non-nationals and excludes income received by resident nationals from abroad.

Net National Product (NNP)

NNP is GNP minus depreciation (capital consumption).
NNP is divided by the population to get per capita income.

NNP at Factor Cost and Market Prices

NNP at Factor Cost is the net output evaluated at factor prices (wages, rents, profits, etc.).
NNP at Market Prices is the net value of final goods and services evaluated at market prices.
NNP at Factor Cost = NNP at Market Prices - Indirect Taxes + Subsidies.

Personal Income and Disposable Income

Personal Income is the total income received by individuals from all sources before payment of direct taxes.
Personal Income = National Income (NNP @ factor cost) - Undistributed Corporate Profits - Corporate Taxes - Social Security Contribution + Transfer Payments.
Disposable Income = Personal Income - Direct Taxes.

National Income Definitions

Alfred Marshall: National income is the true net annual income or revenue of a country.
A.C. Pigou: National income is that part of objective income of the community, including income derived from abroad, which can be measured in money.
Irving Fisher: National dividend or income consists solely of services as received by ultimate consumers.
Simon Kuznets: The net output of commodities and services flowing during the year from the country's productive system in the hands of the ultimate consumers.

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Description

Test your knowledge on the concepts of Gross Domestic Product (GDP) and Gross National Product (GNP) in economics. Learn how to distinguish between these two important economic indicators and understand their implications. Identify the key differences between GDP and GNP and how they are calculated.

GDP vs GNP: Understanding the Key Differences

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