GDP - Gross Domestic Product GDP vs. GNP Questions and Answers

Question 1

A German automobile company operates a large manufacturing plant in the United States.
The profits earned by this plant are repatriated to the company's headquarters in Germany.
How is the value of the cars produced in this plant accounted for in the national income accounts of the United States?

Accepted Answer

It is included in U.S. GDP but excluded from U.S. GNP.

Answer

It is included in U.S. GNP but excluded from U.S. GDP.

Answer

It is included in both U.S. GDP and U.S. GNP.

Answer

It is excluded from both U.S. GDP and U.S. GNP.

Question 2

Which of the following equations correctly represents the relationship between Gross National Product (GNP) and Gross Domestic Product (GDP)?

Accepted Answer

GNP = GDP + Net Property Income from Abroad

Answer

GNP = GDP - Net Exports

Answer

GNP = GDP + Depreciation

Answer

GNP = GDP - Indirect Business Taxes

Question 3

In a country where a large portion of the labor force works abroad and sends significant remittances back home, which of the following relationships between GDP and GNP is most likely?

Accepted Answer

GDP will be significantly lower than GNP.

Answer

GDP will be approximately equal to GNP.

Answer

GDP will be significantly higher than GNP.

Answer

There is no predictable relationship between GDP and GNP in this scenario.

Question 4

An American citizen is an accomplished architect who lives and works for a firm in Canada. The income she earns is included in:

Accepted Answer

U.S. GNP and Canadian GDP.

Answer

U.S. GDP and Canadian GNP.

Answer

U.S. GNP and Canadian GNP.

Answer

U.S. GDP and Canadian GDP.

Question 5

Which of the following statements provides the most accurate distinction between the focus of GDP and GNP?

Accepted Answer

GDP measures the economic output based on the geographical location of production, while GNP measures the output based on the ownership of the factors of production.

Answer

GDP focuses on the total spending by consumers and government, while GNP focuses on total investment.

Answer

GDP includes only final goods, while GNP includes both final and intermediate goods.

Answer

GDP is an inflation-adjusted measure, while GNP is a nominal measure.

Question 6

Country X has a GDP of $500 billion. The income earned by its citizens abroad is $75 billion, and the income earned by foreign residents within Country X is $50 billion. What is the Gross National Product (GNP) of Country X?

Accepted Answer

$525 billion

Answer

$475 billion

Answer

$500 billion

Answer

$625 billion