GDP Vs. GNP 3

Question 1

In the late 1980s, the U.S. switched from using GNP to GDP as its primary national accounts measure. What was the main reason?

Accepted Answer

GDP allows easier international comparisons since most countries use it

Answer

The U.S. adopted GDP in 1991 primarily to align with international standards and allow more consistent cross-country comparisons.

Question 2

Country X has GDP of $500 billion, income paid to foreign factors of $40 billion, and income received from abroad by residents of $30 billion. What is Country X's GNP?

Accepted Answer

$490 billion

Answer

GNP = GDP + income from abroad − income to foreigners = $500B + $30B − $40B = $490 billion.

Question 3

Which scenario would cause a country's GNP to exceed its GDP?

Accepted Answer

Residents earn more abroad than foreigners earn domestically

Answer

When residents' foreign earnings exceed what foreigners earn domestically, NFIA is positive, pushing GNP above GDP.

Question 4

The concept most similar to GNP in modern national accounting terminology is:

Accepted Answer

Gross National Income (GNI)

Answer

GNI has largely replaced GNP in modern usage; both measure income earned by a country's residents regardless of location.

Question 5

A developing country with a large diaspora sending remittances home would see its GNP relative to GDP:

Accepted Answer

Higher, because diaspora earnings abroad add to GNP

Answer

Earnings by residents working abroad are factor income counted in GNP, so a large working diaspora raises GNP above GDP.

GDP - Gross Domestic Product Practice Test

GDP - Gross Domestic Product Practice Test

GDP Vs. GNP 3