1. What is the difference between gross domestic product (GDP) and gross nationa

Question

1. What is the difference between gross domestic product (GDP) and gross national product (GNP)? What is the difference in what GDP measures compared to GNP?

2. Based on the table, what calculations must you make to determine GNP from GDP?

3. What is national income (NI)? What does NI measure?

4. Which was higher in this year, GNP or NI? By how much?

5. What calculations must you make to determine NI from GNP?

6. NI is composed of a number of categories. What category makes up the largest portion of NI?

Explanation / Answer

(1)

GDP measures the value of all final goods and services produced within a country in a given period. GNP measures the value of all final goods and services produced by a country's residents, even if they reside inside the country or abroad. So, an American working in London and remitting money to his family in US will be included within GNP but not within GDP of US.

GNP = GDP + Net factor income from abroad

(2)

No table is provided to calculate.

(3)

National income is the total amount of money produced within the economy during a particular period. It measures the value of all final output produced as result of economic activity.

(4)

No data is provided. Which country are you referring to?

(5)

National Income, NI = GNP - Depreciation - Indirect taxes + Subsidies

(6)

There are 5 main categories of NI:

a. Wages paid to employees

b. Interest Earned - Interest paid [for Household sector]

c. Rental income of people

d. Corporate profit and

e. Proprietor's income

Out of these, Wages constitute the largest portion of NI.

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