Vs. GNP Flashcards
7 cards from real GDP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Vs. GNP flashcards as text
Historical U.S. data shows GDP and GNP are very close in value. This suggests that for the U.S.:
Answer: Income earned abroad by Americans roughly equals income earned in the U.S. by foreigners
When GDP ≈ GNP, net factor income from abroad is near zero, meaning outflows and inflows of factor income are roughly balanced.
Which international organization primarily uses GNI (the modern equivalent of GNP) to classify countries by income level?
Answer: World Bank
The World Bank uses GNI per capita to categorize countries as low-, middle-, or high-income economies.
A country's GDP grows 4% while its GNP grows only 1%. Which of the following could explain this divergence?
Answer: Foreign investors increased profit repatriation from their domestic operations
Rising repatriation of profits by foreign investors increases income counted in foreign GNPs but not the host country's GNP, widening the GDP-GNP gap.
Real GDP adjusts nominal GDP for price changes. Does the same logic apply to GNP?
Answer: Yes, both GDP and GNP can be expressed in real or nominal terms using a price deflator
Both GDP and GNP can be deflated by a price index to produce real values, enabling comparisons across time periods.
Which of the following transactions increases a country's GDP but decreases its GNP (relative to GDP)?
Answer: A foreign-owned company produces goods domestically and repatriates the profits
Foreign-owned production boosts GDP (domestic output), but repatriated profits reduce net factor income from abroad, lowering GNP relative to GDP.
From a long-run growth perspective, why might policymakers in a heavily foreign-invested country monitor GNP growth more carefully than GDP growth?
Answer: GNP reveals how much of the growth actually benefits domestic residents vs. foreign owners
Rapid GDP growth driven by foreign investment may not improve domestic living standards if profits are repatriated; GNP captures only the resident income share.
Which of the following pairs correctly matches the measure to what it emphasizes?
Answer: GDP = geographic output; GNP = resident income
GDP emphasizes production within borders (geographic output) while GNP emphasizes income earned by a nation's residents (resident income), regardless of location.