GDP and GNP Concepts: A Comprehensive Guide for Economics Students

Question 1

Which of the following is NOT included in the calculation of GDP?

Accepted Answer

Social welfare benefits

Answer

Household spending

Answer

Government spending

Answer

Exports minus imports

Question 2

Which economic measure includes income earned by citizens abroad but excludes income generated by foreigners within the country?

Accepted Answer

GNP (Gross National Product)

Answer

GDP (Gross Domestic Product)

Question 3

Which of the following is NOT a component of GDP?

Accepted Answer

Net imports

Answer

Consumer spending

Answer

Investment

Answer

Government spending

Question 4

Which of the following is NOT included in the calculation of Gross Domestic Product (GDP)?

Accepted Answer

Government transfer payments

Answer

Consumption expenditure

Answer

Investment

Question 5

Which of the following is a component of Gross Domestic Product (GDP)?

Accepted Answer

Consumer spending made within the country

Answer

Foreign direct investment received by the country

Answer

Government revenue collected by the country

Answer

Exports from the country

Question 6

What is the key difference between Gross Domestic Product (GDP) and Gross National Product (GNP)?

Accepted Answer

GNP includes income earned by the country's residents abroad, while GDP does not.

Answer

GDP includes government spending, while GNP does not.

Answer

GDP is measured using market prices, while GNP uses factor costs.

Question 7

Which of the following is a recognised limitation of GDP as a measure of economic well-being?

Accepted Answer

It does not account for environmental degradation or depletion of natural resources.

Answer

GDP is only available annually.

Answer

GDP is subject to frequent revision.

Answer

It can be difficult to compare GDP across different countries.

Question 8

What is the standard formula used to calculate a country's GDP?

Accepted Answer

C (Consumption) + I (Investment) +  G (Government spending) + (X - M) (Net exports)

Answer

C (Consumption) - I (Investment) - G (Government spending) + (X - M) (Net exports)

Answer

C (Consumption) + I (Investment) - G (Government spending) + (X + M) (Total exports)

Answer

C (Consumption) - I (Investment) + G (Government spending) + (X - M) (Net exports)

Question 9

In the calculation of GNP, which of the following is included?

Accepted Answer

Profits earned by domestic companies operating abroad

Answer

Profits earned by foreign companies operating domestically

Answer

Government spending on public services and infrastructure

Answer

Tax revenue collected by the country's government

Question 10

What is the key difference between nominal GDP and real GDP?

Accepted Answer

Nominal GDP is measured using current prices, while real GDP is adjusted for inflation using a base year.

Answer

Nominal GDP is measured annually, while real GDP is measured quarterly.

Answer

Nominal GDP includes government spending, while real GDP does not.

Question 11

Which of the following is a benefit of using real GDP as a measure of economic growth?

Accepted Answer

Real GDP eliminates the distorting effects of inflation, providing a more accurate comparison of economic growth over time.

Answer

Real GDP is easier to calculate than nominal GDP.

Answer

Real GDP is more volatile than nominal GDP.

Answer

Real GDP is available more frequently than nominal GDP.

Question 12

How is the economic growth of a country typically measured?

Accepted Answer

GDP growth is calculated as the percentage change in real GDP from one period to another, usually a quarter or a year.

Answer

GDP growth is calculated as the absolute change in nominal GDP over time.

Answer

GDP growth is only positive if the economy is growing in all sectors.

Question 13

Which of the following factors is most likely to contribute to sustained GDP growth?

Accepted Answer

Technological innovation that increases productivity and efficiency

Answer

Increased taxation that reduces disposable income and consumer spending

Answer

Government borrowing that increases national debt

Answer

Natural disasters that disrupt production and supply chains

Question 14

What is GDP per capita and how is it calculated?

Accepted Answer

GDP per capita is a measure of the average economic well-being of a country's population, calculated by dividing the country's GDP by its total population.

Answer

GDP per capita is the total GDP of a country minus its population.

Answer

GDP per capita is the GDP of a country divided by the number of households.

Answer

GDP per capita is the GDP of a country multiplied by its population.

Question 15

Which of the following is likely to lead to an increase in GDP?

Accepted Answer

An increase in exports

Answer

A severe weather event

Answer

A reduction in government expenditure

Answer

A decline in stock prices

Question 16

GDP can be calculated using three main approaches. Which one involves measuring the total income earned by all factors of production?

Accepted Answer

Income approach

Answer

Value-added approach

Answer

Production approach

Question 17

In a closed economy, GNP is equal to:

Accepted Answer

GDP

Answer

GDP - Net exports

Answer

GNP - Net exports

Answer

GDP + Net exports

Question 18

Which of the following would be considered a non-market activity in the calculation of GDP?

Accepted Answer

Unpaid housework

Answer

Production of goods for sale in a factory

Answer

Sale of services by a self-employed individual

Answer

Purchase of a new car

Question 19

GDP per capita is calculated by:

Accepted Answer

Dividing GDP by the total population

Answer

Subtracting government spending from GDP

Answer

Adding net exports to GDP

Answer

Multiplying GDP by the population growth rate

Question 20

Which of the following is NOT a component of GDP?

Accepted Answer

Transfer payments

Answer

Government spending

Answer

Investment

Answer

Consumption

Question 21

GNP differs from GDP in that it includes:

Accepted Answer

Income earned by citizens abroad

Answer

Net exports

Answer

Government subsidies

Answer

Depreciation

Question 22

Which of the following is a limitation of GDP as a measure of economic well-being?

Accepted Answer

It does not account for environmental degradation.

Answer

It is easy to calculate.

Answer

It is often used in economic policymaking.

Answer

It is a comprehensive measure.

Question 23

The formula for calculating GDP is:

Accepted Answer

C + I + G + (X - M)

Answer

C + I + G

Answer

GNP - Depreciation

Answer

(X - M) + I

Question 24

Which of the following most accurately defines Gross Domestic Product (GDP)?

Accepted Answer

The total value of all final goods and services produced within a country's borders in a given period.

Answer

The total value of all goods and services produced by a country's citizens in a given period.

Answer

The total value of all goods and services produced and consumed within a country's borders in a given period.

Answer

The total income earned by residents of a country in a given period.

Question 25

Which of the following is unique to Gross National Product (GNP) and not included in GDP?

Accepted Answer

Income earned by citizens of a country working abroad.

Answer

Profits of foreign companies operating within a country.

Answer

Investment in new machinery and equipment.

Answer

Government spending on healthcare.

Question 26

What does the GDP deflator primarily measure?

Accepted Answer

The level of inflation in an economy.

Answer

The level of unemployment in an economy.

Answer

The growth rate of an economy.

Answer

The exchange rate of a country's currency.

Question 27

Which of the following factors would have a positive impact on a country's GDP?

Accepted Answer

Increased government spending.

Answer

Reduced investment in new businesses.

Answer

An economic recession.

Answer

A major earthquake.

Question 28

What does GDP per capita represent?

Accepted Answer

The average income earned by each person in a country.

Answer

The number of people employed in a country.

Answer

The total output produced by a country in a given year.

Answer

The percentage increase in a country's GDP from one year to the next.

Question 29

Which of the following is excluded from the calculation of GNP, but included in GDP?

Accepted Answer

Income earned abroad by UK residents

Answer

Investment

Answer

Consumer spending

Answer

Government spending

Question 30

What is the primary distinction between real and nominal GDP?

Accepted Answer

Real GDP adjusts for inflation while nominal GDP does not

Answer

Real GDP only includes goods, while nominal GDP includes both goods and services

Answer

Nominal GDP only includes services, while real GDP includes both goods and services

Question 31

Which of the following is included in the calculation of GNP but not GDP?

Accepted Answer

Income earned by UK-owned businesses abroad

Answer

Payments to foreign workers in the UK

Answer

Government expenditure on healthcare

Answer

Investment in new capital

Question 32

GDP is widely used as a measure of economic activity primarily because it is:

Accepted Answer

A widely accepted and comparable measure across countries

Answer

A highly detailed breakdown of economic sectors

Answer

A comprehensive and precise measure of economic performance

Question 33

A significant disadvantage of using GDP as an indicator of economic well-being is that it:

Accepted Answer

Excludes economic activities that occur outside of the formal economy

Answer

Is susceptible to manipulation by governments

Answer

Requires extensive data collection

Answer

Only applies to the manufacturing sector

Question 34

The relationship between GNP and GDP per capita can be described as:

Accepted Answer

GNP per capita is the sum of GDP per capita and net income from abroad

Answer

GDP per capita is the sum of GNP per capita and net income from abroad

Answer

GNP per capita is simply GDP per capita

Question 35

A potential implication of a high GDP but a low GNP is that the country:

Accepted Answer

May have a high level of foreign debt

Answer

Must have a high standard of living

Answer

Likely has a positive trade balance