9. The difference between GNP and GDP is A) GNP includes income received from ab

Question

9. The difference between GNP and GDP is A) GNP includes income received from abroad and excludes income paid abroad. B) GNP excludes income received from abroad and includes income paid abroad. C) GNP includes exports and imports. D) GNP excludes exports and imports. 10. Which of the following transactions would be recorded in the financial account? A) U.S. investors purchase bonds from Germany B) A person living in the United States sends money home to her family in Cuba. C) The Fed increases its holdings of yen. D) The U.S. transfers a military base to another country 11. Which of the following is an example of external debt for the United States? A) A purchase of Apple stock by a person in Canada B) A loan made in yen to a company in the United States C) A loan made by Citibank to the government of Mexico D) A purchase of U.S. Treasury bills by the Bank of Japan 12. External debt is not usually a problem for high-income countries for which of the following reasons? A) High-income countries take out loans denominated in their own currency. B) High-income countries do not need to borrow C) High-income countries are too large to default on loans. D) High-income countries use loans to build infrastructure and create economic growth. 13. Capital controls are most often aimed at slowing or eliminating movements of A) reserve assets. B) foreign direct investment C) foreign portfolio investment D) non-reserve government assets. 14. National savings is important for all of the following reasons EXCEPT A) it can be used to consume additional foreign goods. B) it can be used to fund private investment C) it can be used to fund government investment. D) it can be used to fund foreign investment 15. Which of the following is NOT a problem with excessive debt? A) It worsens the central govemment's budget position by adding large debt service payments to other budget items. B) It reduces the quantity of resources available to invest in economic development. C) If debt service is substantial, schools, health clinics, roads, ports, other infrastructure, and social needs are less likely to be addressed. D) It can reduce the chance of a crisis.

Explanation / Answer

Question 9

GNP is calculated as follows -

GNP = GDP + NFIA

NFIA implies net factor income from abroad.

It is calculated as follows -

NFIA = Income received from abroad - Income paid to abroad

So,

GNP includes income received from abroad and excludes income paid to abroad.

This is the main difference between GNP and GDP.

Hence, the correct answer is the option (A).

Question 10

Financial account is a component of BOP account of the country.

It includes foreign ownership of domestic assets and domestic ownership of foreign assets.

So, it will be taken in financial account.

Hence, the correct answer is the option (A).

Question 11

External debt implies amount borrowed by a country from foriegn entities or multilateral lending institutions.

So,

A purchase of US Treasury bills by Bank of Japan is an example of external debt for the United States.

Hence, the correct answer is the option (D).

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