Question

Questions:

1. Define Gross National Product (GNP) and its purpose and limitations.

2. What is your understanding GNP accounting:

a. expenditure approach and cite an example.

b. income approach and cite an example.

3. What do you mean by a personal income.

Answer 1

1) GDP measures the value of goods and services produced within a country's borders, by citizens and non-citizens alike.

GNP measures the value of goods and services produced by only a country's citizens but both domestically and abroad. GDP is the most commonly used by global economies.

GDP is the most commonly used by global economies. The United States abandoned the use of GNP in 1991, adopting GDP as its measure to compare itself with other economies.

Limitations of GNP

1. Economic Versus Social Values
2. Economic Versus Social Costs
3. Distribution of National Output
4. Income and Output per Capita
5. Upgrading the Quality of Basic Data

2) The most common way to calculate GNP is summing up government expenditure, net exports, consumer expenditure, and private domestic investment and subtracting the net payment outflows to foreign nationals.

US GNP = GDP + NR (net income receipts) – NP (net income outflows to foreign nationals

a) Expenditure approach.

the expenditure approach is cited more often

The expenditure approach begins with the money spent on goods and services

b) Income approach

The income approach starts with the income earned from the production of goods and services

3) Personal Income

Personal income refers to all income collectively received by all individuals or households in a country. Personal income includes compensation from a number of sources, including salaries, wages, and bonuses received from employment or self-employment, dividends and distributions received from investments, rental receipts from real estate investments, and profit sharing from businesses.