Question

SECTION A (answer one question only)

A hypothetical national income data for a country in a particular year is given: Wages and Salaries $250 million; Income paid abroad $75 million; Income from self employment $120 million; Stock appreciation $5 million; Interest $10 million; Income received from abroad $50 million; Rent $25 million; Depreciation allowance $3 million; Royalties $2 million; Profits and dividends $35 million.
(a) Calculate the Gross Domestic Product (GDP). (11 marks)
(b) Calculate the Gross National Product (GNP). (5 marks)
(c) Calculate the Net National Product (NNP). (4 marks)

Accepted Answer

(a) GDP = C + I + G (Aggregate Expenditure); using the income approach, GDP is the sum of all factor incomes earned within the country:
Wages and Salaries 250 + Income from self employment 120 + Stock appreciation 5 + Interest 10 + Rent 25 + Depreciation allowance 3 + Royalties 2 + Profits and dividends 35 = $450 million.
GDP = $450 million.

(b) GNP = GDP + Net income from abroad.
Net export/Net income from abroad = Income received from abroad - Income paid abroad = $50million - $75million = -$25million.
GNP = $450million + (-$25million) = $425 million.

(c) NNP = GNP - Depreciation (capital consumption allowance).
NNP = $425million - $3million = $422 million.

GCE Economics 2022 Theory — Question 1

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