8.4: Other Measures of Total Production and Total Income

In the​ U.S., gross domestic product (GDP) and gross national product ​(GNP​) are close in value. Under what circumstances would GNP be much larger than​ GDP? Many U.S. citizens currently work in foreign countries while few foreign citizens currently work in the U.S. Few foreign citizens currently work in the U.S. and few foreign firms maintain facilities in the U.S. Few foreign firms maintain facilities in the U.S. while many U.S. firms are currently operating abroad. All of the above would push GNP above GDP.

All of the above would push GNP above GDP.

If you were attempting to forecast the level of consumer spending by​ households, which measure of total production or total income might be most helpful in making your​ forecast?

Disposable personal income

When a significant fraction of domestic production takes place in​ foreign-owned facilities, a​ country's difference between GDP and GNP is as​ follows:

GDP will be much larger than GNP.

U.S. Gross National Product​ (GNP) differs from U.S. Gross Domestic Product​ (GDP) in which of the following​ ways? In the United​ States, the difference between GNP and GDP is _________ that of many other countries.

GNP is the value of final goods and services produced by residents of the U.S GNP considers production that occurs outside the U.S. smaller than

All of the following are correct except

Gross domestic income does not include health insurance benefits received by the employees.

The table and figure show GDP measured in terms of the total income received by households. Use the table and figure to help determine which of the following statements about the division of income is false. A. Gross domestic income is measured precisely. B. Profits include the profits of sole proprietorships and profits of corporations. C. The largest component of income received by households is wages. D. Wages are slightly more than three times as large as the profits received by sole proprietors and the profits received by corporations combined.

Gross domestic income is measured precisely.

Disposable personal income is equal to

personal income minus personal tax payments.

In​ 2016, the largest component of gross domestic income was

wages

Which component of gross domestic income is the​ largest?

wages

Indicate whether the following statement is correct or incorrect. ​"Corporate profits are much too​ high: Most corporations make profits equal to 50 percent of the price of the products they​ sell."

​Incorrect: The largest component of gross domestic income is​ wages, which are about three times as large as profit.

Ireland is one of the few countries where GDP and GNP differ dramatically. Using GDP per​ person, Ireland has the third highest income per person in Europe. An article on the Financial Times website states​ that: ​"With GDP being about 20 percent larger than​ GNP, Irish people appear​ (when using GDP per​ person) to be richer than what they feel they​ are." ​Source: Valentina​ Romei, "Ireland Is the Wealthiest Economy in Europe...or​ Not," ft.com, May​ 13, 2015. Briefly explain the​ author's reasoning.

A significant portion of production in Ireland is by​ foreign-owned firms, which makes the Irish people appear to be richer than they feel they are.

Based on the table and​ graph, which of the following statements regarding total production and total income is​ true?

Each measure of production and income gives a different value for total production and income

Suppose the amount the federal government collects in personal income taxes decreases, while the level of GDP remains the same. What will happen to the values of national​ income, personal​ income, and disposable personal​ income? ---- Suppose the amount the federal government collects in personal income taxes increases​, while the level of GDP remains the same. What will happen to the values of national​ income, personal​ income, and disposable personal​ income?

National income will remain the same Personal income will remain the same Disposable personal income will increase ---------------- National income will remain the same Personal income will remain the same Disposable personal income will decrease

Consider the following​ table: National income​ (NI) equals $____ billion Personal income​ (PI) equals $____ billion Disposable personal income​ (DPI) $ _____ billion

National income ​(NI)=Net national product (NNP)−Indirect business taxes. NNP=Gross national product ​(GNP)minus−Consumption of fixed capital​ (depreciation). $11,670 Personal income (PI)=National income − Corporate earnings + Government transfer payments. $11,120 Disposable personal income = Personal income − Personal taxes. 10,120

To calculate personal income from national​ income, which of the following must the BEA​ do?

add government transfer payments

Which of the following do we subtract from GDP to obtain national​ income?

depreciation