Understanding National Income Concepts

What is Gross Domestic Product (GDP)?

• GDP is the total income earned by a country's residents regardless of location.

• Gross Domestic Product (GDP) only includes the value of exported goods.

• Gross Domestic Product (GDP) measures the wealth of individuals in a country.

• Gross Domestic Product (GDP) is the total value of all goods and services produced within a country's borders in a specific time period.

How is Net National Product (NNP) calculated?

• NNP = GNP - Depreciation

• NNP = GDP + Depreciation

• NNP = GNP + Net Exports

• NNP = GNP - Taxes

Explain the importance of National Income Accounting.

• National Income Accounting is used for calculating tax rates.

• It helps in predicting weather patterns.

• National Income Accounting is important for measuring economic performance, guiding policy decisions, and understanding living standards.

• It focuses solely on environmental impacts.

What are the three main methods of calculating income?

• Earnings Method

• Profit Method

• Gross Income Method, Net Income Method, Cash Flow Method

• Revenue Method

Define economic growth and its significance.

• Economic growth is the decline in production of goods and services.

• Economic growth is solely about increasing government spending.

• Economic growth is the increase in the production of goods and services in an economy, significant for improving living standards and creating jobs.

• Economic growth has no impact on job creation.

What is the difference between nominal and real GDP?

• Nominal GDP includes only government spending, while Real GDP includes all economic activities.

• Nominal GDP measures total output, while Real GDP measures total income.

• Nominal GDP is not adjusted for inflation, while Real GDP is adjusted for inflation.

• Real GDP is calculated using current market prices, while Nominal GDP uses constant prices.

How does GDP affect a country's economic policy?

• GDP affects a country's economic policy by guiding decisions on fiscal and monetary policies based on economic growth indicators.

• GDP is solely a measure of population size.

• GDP has no impact on economic policy decisions.

• GDP only affects trade agreements, not domestic policies.

What role does depreciation play in calculating NNP?

• Depreciation is subtracted from GNP to calculate NNP.

• Depreciation is added to GNP to calculate NNP.

• Depreciation has no effect on NNP calculations.

• Depreciation is used to increase GNP when calculating NNP.

Discuss the limitations of using GDP as a measure of economic welfare.

• GDP accounts for all forms of economic activity, including illegal markets.

• GDP measures only the total production of goods and services.

• GDP is limited as it does not reflect income inequality, environmental costs, unpaid labor, or overall quality of life.

• GDP is a perfect indicator of a country's happiness and well-being.

How can economic development be distinguished from economic growth?

• Economic growth is about quantitative increases in output, while economic development is about qualitative improvements in living standards.

• Economic growth is a long-term process, while economic development is a short-term phenomenon.

• Economic development is solely about increasing GDP, while economic growth is about social welfare.

• Economic growth focuses on improving technology, while economic development is about increasing population.