GDP Vs. GNP 5

Question 1

Historical U.S. data shows GDP and GNP are very close in value. This suggests that for the U.S.:

Accepted Answer

Income earned abroad by Americans roughly equals income earned in the U.S. by foreigners

Answer

When GDP ≈ GNP, net factor income from abroad is near zero, meaning outflows and inflows of factor income are roughly balanced.

Question 2

Which international organization primarily uses GNI (the modern equivalent of GNP) to classify countries by income level?

Accepted Answer

World Bank

Answer

The World Bank uses GNI per capita to categorize countries as low-, middle-, or high-income economies.

Question 3

A country's GDP grows 4% while its GNP grows only 1%. Which of the following could explain this divergence?

Accepted Answer

Foreign investors increased profit repatriation from their domestic operations

Answer

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.

Question 4

Real GDP adjusts nominal GDP for price changes. Does the same logic apply to GNP?

Accepted Answer

Yes, both GDP and GNP can be expressed in real or nominal terms using a price deflator

Answer

Both GDP and GNP can be deflated by a price index to produce real values, enabling comparisons across time periods.

Question 5

Which of the following transactions increases a country's GDP but decreases its GNP (relative to GDP)?

Accepted Answer

A foreign-owned company produces goods domestically and repatriates the profits

Answer

Foreign-owned production boosts GDP (domestic output), but repatriated profits reduce net factor income from abroad, lowering GNP relative to GDP.

GDP - Gross Domestic Product Practice Test

GDP - Gross Domestic Product Practice Test

GDP Vs. GNP 5