Vs. GNP Flashcards

A U.S. citizen works in Canada and earns $80,000. How does this income affect U.S. GDP vs. U.S. GNP?

Answer: Counted in U.S. GNP only

U.S. GNP includes income earned by U.S. residents abroad, while U.S. GDP only counts output produced within U.S. borders.

Which of the following best describes the key difference between GDP and GNP?

Answer: GDP is geographic-based; GNP is nationality-based

GDP measures output within a country's borders regardless of who produces it, while GNP measures output by a country's residents regardless of where they produce it.

The formula GNP = GDP + Net Factor Income from Abroad (NFIA) shows that if NFIA is negative, then:

Answer: GNP is less than GDP

A negative NFIA means foreigners earn more from the country than its residents earn abroad, making GNP smaller than GDP.

For a small country like Ireland with many foreign multinational corporations operating domestically, which is typically larger?

Answer: GDP, because foreign firms boost domestic output beyond what Irish residents earn

Foreign multinationals generate large domestic output counted in GDP, while profits repatriated abroad reduce GNP relative to GDP.

Net National Product (NNP) is most directly derived from which measure?

Answer: GNP minus depreciation

NNP equals GNP minus capital depreciation, representing the net output available after accounting for wear on the capital stock.

If a Japanese automaker operates a plant in Ohio, the plant's output is counted in:

Answer: U.S. GDP and Japan's GNP

Output produced on U.S. soil counts in U.S. GDP; profits flowing back to Japanese owners count in Japan's GNP.

Economists studying a country's standard of living for its own residents would more likely prefer which measure?

Answer: GNP, because it reflects income earned by the country's residents

GNP better reflects income available to a nation's residents, making it more relevant for analyzing living standards of that population.