GDP & GNP

Question 1

GDP (Gross domestic product)

Answer 1

1. total market value
2. all final goods and services
3. produced within geographical boundary of country over period of time
4. regardless of nationals or foreigners

Question 2

GNP (Gross national product/income)

Answer 2

1. total market value
2. all final goods and services
3. produced by citizens of a country over period of time
4. regardless of geographical boundary
5. often used as a measure of national income

Question 3

Diff between GNP and GDP

Answer 3

• diff is net property income frm abroad
• income earned by nationals from productive use of resource abroad (property income received frm abroad)
• income earned by foreigners for productive use of resource in country (property income paid to abroad)

Question 4

Net property income frm abroad

Answer 4

• diff between property income received frm abroad and property income paid to abroad
• GNP/GNI = GDP + net factor income from abroad

Question 5

Nominal GDP

Answer 5

• GDP at current market prices
• increase in nominal GDP could be due to:
• (i) increase in output
• (ii) increase in GPL (inflation)
• (iii) increase in both output and GPL

Question 6

GDP deflator

Answer 6

• used to obtain GDP at constant prices (Real GDP) by deflating value of nominal GDP
• a type of price index (GDP deflator)
• prevents (ii) GPL and (iii) both GPL&output by using a GDP deflator

Question 7

GDP deflator vs CPI

Answer 7

• Consumer Price Index: incorporates final gds and service consumed by households
• GDP deflator: incorporates all final goods produced by economy

Question 8

Real GDP

Answer 8

• value of GDP at constant prices by deflating value of nominal GDP
• can be adjusted for inflation
• only affected by total output (not GPL or GPL&output)
• when real GDP rise, means country in producing more output, not increasing due to price increase (GPL)