Types of GDP

Question 1

What is GNI?

Answer 1

Total income that is earned by a country’s factors of production, regardless of their geographical location

Question 2

What is the formula for GNI?

Answer 2

GNI = GDP + income received from abroad by foreign citizens - income sent abroad by domestic non-residents

Question 3

What are the 3 advantages of GNI over GDP?

Answer 3

1. Remittances are taken into account
2. Repatriation of profits is not a concern
3. Better indicator of how much income is received by each person in the population on average

Question 4

What is GDP per capita?

Answer 4

GDP per capita takes the total value of output and divides it by the total population of the country

Question 5

What is an advantage of GDP/GNI per capita?

Answer 5

Useful as a summary measure of the standard of living in a country, because it provides an indication of how much of total output/income in the economy corresponds to each person in the population on average

Question 6

Why is GDP/GNI calculated as per capita?

Answer 6

1. Countering population growth
2. Countering differences in population sizes

• GDP/GNI per capita illustrates how much the average person owns/earns in a country, rather than how much the country owns as a whole (which would increase as population increases)

Question 7

What is the relation between GDP/GNI growth rate and population growth rate?

Answer 7

1. If GDP/GNI increases faster than population, GDP/GNI per capita increases (people on average own/earn more)
2. If GDP/ GNI increases slower than population, then GDP per capita falls (people on average own/earn less)