GDP Vs. GNP 2

Question 1

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

Accepted Answer

Counted in U.S. GNP only

Answer

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

Question 2

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

Accepted Answer

GDP is geographic-based; GNP is nationality-based

Answer

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.

Question 3

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

Accepted Answer

GNP is less than GDP

Answer

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

Question 4

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

Accepted Answer

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

Answer

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

Question 5

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

Accepted Answer

GNP minus depreciation

Answer

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

GDP - Gross Domestic Product Practice Test

GDP - Gross Domestic Product Practice Test

GDP Vs. GNP 2