Multiple Choice
Using the information above, calculate the inflation rate for 2012 in the United States of Barbeque.
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10. Measuring National Output and Income
Nominal GDP and Real GDP
Multiple Choice
Under which of the following conditions is a country's GDP approximately equal to its GNP?
A
When net income from abroad is close to zero
B
When government spending equals private investment
C
When the inflation rate is stable
D
When the country has a large trade surplus
Verified step by step guidance1
Understand the definitions: GDP (Gross Domestic Product) measures the total value of goods and services produced within a country's borders, while GNP (Gross National Product) measures the total income earned by a country's residents, including income from abroad.
Recall the relationship between GDP and GNP: \( \text{GNP} = \text{GDP} + \text{Net income from abroad} \), where net income from abroad is income earned by residents from foreign investments minus income earned by foreigners from domestic investments.
Analyze the condition for GDP to be approximately equal to GNP: This happens when the net income from abroad is close to zero, meaning the income residents earn from abroad is nearly equal to the income foreigners earn domestically.
Evaluate the other options: Government spending equaling private investment, stable inflation, or a large trade surplus do not directly affect the relationship between GDP and GNP.
Conclude that the key factor making GDP approximately equal to GNP is when net income from abroad is close to zero.
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