Question 1

Which of the following best describes the difference between Gross Domestic Product (GDP) and Gross National Product (GNP)?

Accepted Answer

GDP measures the total market value of goods and services produced within a country's borders, while GNP measures the total market value of goods and services produced by a country's citizens (including overseas production).

Question 2

Suppose a U.S. professor teaches in Turkey. According to the definitions provided, how is this activity counted in GDP and GNP?

Accepted Answer

It is excluded from U.S. GDP but included in U.S. GNP.

Question 3

Which formula correctly calculates National Income (NI) from GDP?

Accepted Answer

$$NI = GDP - depreciation$$

Question 4

In 2022, real GDI closely matched real GDP in the United States. What does this suggest about the statistical discrepancy between the two measures?

Accepted Answer

The statistical discrepancy was negligible, meaning the two measures were nearly identical.

Question 5

Which of the following components is NOT included in the calculation of Gross Domestic Income (GDI)?

Accepted Answer

Transfer payments

Question 6

If the share of wages in national income falls from 60% to 52% over several decades, what is the most likely macroeconomic implication?

Accepted Answer

Rising income inequality, as a larger portion of output flows to capital owners.

Question 7

Disposable Personal Income (DPI) is calculated by which of the following formulas?

Accepted Answer

$$DPI = Personal Income - taxes$$

Question 8

In the circular flow model, which income component is the main source for households according to the 2022 income distribution data?

Accepted Answer

Wages

Question 9

If real GDP rises while real GDI falls in a given year, what might this divergence signal to macroeconomic analysts?

Accepted Answer

A potential recession signal, as income-based measures may reflect underlying economic weakness.

Question 10

Which of the following best explains why GNP is greater than GDP for the United States?

Accepted Answer

The U.S. has substantial foreign direct investment and overseas earnings.

Question 11

Which equation correctly represents the calculation of Gross Domestic Income (GDI)?

Accepted Answer

$$GDI = wages + profits + rent + interest + taxes + depreciation$$

Question 12

In 2022, which component accounted for the largest share of total income in the U.S.?

Accepted Answer

Wages

Question 13

If a country’s capital owners receive a larger share of national income over time, what is a likely consequence for household income distribution?

Accepted Answer

Household income inequality will likely increase.

Question 14

Which of the following is a plausible reason for the statistical discrepancy between GDP and GDI?

Accepted Answer

Measurement errors in collecting data on income and output.

Question 15

A country’s GDP is $$26 trillion, depreciation is 2 $$trillion, and net foreign factor income is $1 trillion. What is the country’s National Income (NI)?

Accepted Answer

$$NI = 26 - 2 = 24$$ trillion

Question 16

Which of the following statements about labor’s share of income in the U.S. is supported by the data from 1970 to 2021?

Accepted Answer

Labor’s share of income dropped by 4 percentage points, signaling rising income inequality.

Question 17

If government revenue and capital wear-out are included in the income distribution, which component do they fall under?

Accepted Answer

Taxes, depreciation, statistical discrepancy

Question 18

Which of the following is NOT a direct component of National Income?

Accepted Answer

Transfer payments

Question 19

If a country’s real GDP and real GDI diverge significantly, what is a recommended approach for analysts?

Accepted Answer

Average GDP and GDI for a balanced view.

Question 20

Which of the following best describes the role of corporate profits and sole-proprietor profits in the income distribution?

Accepted Answer

Corporate profits are always larger than sole-proprietor profits in absolute terms, but sole-proprietor profits collectively represent a substantial share due to the number of small businesses.

National Income and Product Accounts: GDP, GNP, and Income Distribution

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