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ECON 2400 Lecture Notes - Lecture 24: Gross National Product, Black Market

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School
York University
Department
Economics
Course
ECON 2400
Professor
prof Antone

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Document Summary

Before 1991, gross national product (gnp) was used in the united states as the official measure of aggregate production. In line with international practice, however, the official measure became gdp in december of. In practice, there is little difference between gdp and gnp in the united states, but in principle the difference could matter significantly. Gnp measures the value of output produced by domestic factors of production, whether or not the production takes place (as is the case for gdp) inside u. s. border. Similarly, if a honda plant in ohio has japanese owners, the profits of the plant would not be included in gnp, as these profits are not income for american residents, but the profits would be included in gdp. Gross national product is the sum of gdp and net factor payments (nfp) from abroad to domestic residents or gnp = gdp + nfp, where nfp denotes net factor payments from abroad.

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Related Questions

The Gross National Product (GNP) of the United States is equal to

A. the value of the total income received by all of the residents of the United States.

B. the value of final goods and services produced within the United States.

C. the value of the total income received by all households in the United States, after taxes are paid.

D. the value of final goods and services produced by U.S. factors of production.

 

If a large amount of production within a country takes place at foreign-owned facilities, then it is likely that the country's GDP will be (larger than/smaller than) GNP.

51. Gross national product equals:
A) the aggregate output of the citizens & businesses of aneconomy in a 1-year period.
B) the aggregate final output of the citizens & businesses ofan economy in a 1-year period.
C) the total market value of all goods & services produced inan economy in a 1-year period.
D) the total market value of all final goods & servicesproduced in an economy in a 1-year period.

52. Which of the following is not included in GNP but is includedin GDP?
A) The value of a Portuguese company's production in the UnitedStates.
B) The income of a U.S. citizen working in Portugal.
C) The value of a U.S. company's production in Portugal.
D) The sales of a U.S. company to U.S. citizens.

53. To calculate GDP, multiply the __________ of each final goodand service produced in an economy in a year by its __________ andthen sum the result.
A) quantity; share in total output C) price, share in totaloutput
B) quantity; price D) price, quality

54. Counting both the value of the flour used to make a loaf ofbread and the value of the loaf of bread as part of GDP:
A) is necessary to accurately compute GDP.
B) is incorrect because bread is an intermediate product.
C) is incorrect because flour is an intermediate good.
D) is incorrect because flour is a final good.

55. Suppose the value of your home increases from $100,000 to$125,000. If you continue to live in your home, the increase in itsvalue:
A) adds nothing to GDP. C) increases GDP by $100,000.
B) increases GDP by $25,000. D) increases GDP by $125,000.

56. If a used car dealer buys a car for $6000 and resells it for$6500, how much has been added to GDP?
A) nothing. B) $500. C) $6000. D) $6500

57. Which of the following is not a part of this year's GDP?
A) The value of a product produced last year but sold thisyear.
B) The value of a haircut.
C) The value of a new car produced and purchased during theyear.
D) The value of new homes built this year, regardless of whetherthey are sold.

58. Which of the following would not increase this year'sGDP?
A) Home repairs performed by the owner.
B) A commission charged by your broker when you sold 100 shares ofBorden stock.
C) The sales of a corporation.
D) The value of a doctor's services to his or her patients.

59. The circular flow model shows:
A) the movement of expenditures and factor payments through theeconomy.
B) how national income is distributed to individuals.
C) how national income changes over time.
D) the movement of goods from one business to another.

The following table contains approximate figures for the gross domestic product (GDP) and the national debt in the United States for June 2005 and June 2011. The national debt represents the total amount of money owed by the federal government to holders of U.S. securities. All numbers are in trillions of dollars.

  GDP Total National Debt Debt Held by

Debt Held Outside Fed. Govt. and Fed. Reserve
(Trillions of Dollars) (Trillions of Dollars) Federal Government Foreign Ownership U.S. Ownership
and Federal Reserve (Trillions of Dollars) (Trillions of Dollars)
(Trillions of Dollars)
June 2005 12.3 7.8 4.0 1.9 1.9
June 2011 15.2 14.3 4.6 4.5 5.2

Source: U.S. Treasury, Bureau of Economic Analysis.

1. Publicly held debt is the portion of the national debt that is held outside the federal government and the Federal Reserve System. In June 2005, the publicly held debt as a percentage of the total national debt was (49%; 53.8%; 48.7%; 49.5%).

2. In June 2005, the percentage of the U.S. national debt held by foreigners was (24.9%; 24.4%; 26.5%; 25.8%).

3. The fraction of the national debt held by foreigners will eventually need to be repaid to foreigners, thereby reducing the collective purchasing power of Americans. Between 2005 and 2011, the fraction of the national debt held by foreigners (decreased, increased).

4. The absolute level of the debt does not necessarily provide a clear indication of a nation's debt burden. Thus, economists often look at relative measures of the national debt. One possible relative measure of the national debt is the federal debt held by the public (outside the federal government and the Federal Reserve) as a percentage of GDP. In 2005, publicly held debt was (51.0%; 50.5%; 46.2%; 30.9%) of GDP. Between 2005 and 2011, publicly held debt as a percentage of GDP (Increased, Decreased).