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Measuring Economic Activity and Illustrating Its Variations · Paper 1 — Free Economics HL Practice Questions
1MasterySAQ-SGross Domestic Product (GDP) and other measures of national income6 marksPaper 1~9 min
The economy of Valoria has a GDP of USD 900 billion. Its GNP is USD 870 billion, and its NNP is USD 820 billion.
(a)
Calculate the net income from abroad for Valoria. [1 mark]
(b)
Draw a circular flow of income that includes the foreign sector, clearly labelling the relevant income flows between the domestic economy and the rest of the world. [2 marks]
(c)
Using your , analyse how the relationship between GDP and GNP in Valoria affects the measurement of national income. [3 marks]
Solutions
2MasterySAQ-SGross Domestic Product (GDP) and other measures of national income4 marksPaper 1~6 min
The table below shows selected national income data for the economy of Brazil in 2023, measured in billions of US dollars.
Component — Value (USD billions)
Gross Domestic Product (GDP) —
Net property income from abroad —
Depreciation (Capital Consumption) —
(a)
Calculate Brazil's Gross National Product (GNP) in 2023. [1 mark]
(b)
Using the data provided, explain why Net National Product (NNP) is considered a more accurate measure of sustainable economic welfare than GDP. [3 marks]
Solutions
3MasterySAQ-SGross Domestic Product (GDP) and other measures of national income4 marksPaper 1~6 min
The government of Vietnam is considering two policies to boost national income:
- Policy X: A large increase in government spending on new infrastructure, financed by borrowing
- Policy Y: A reduction in corporate income taxes to attract foreign direct investment
The following data apply to Vietnam in a given year:
- GDP: USD 450 billion
- Net factor income from abroad (NFIA): billion dollars
- Depreciation: USD 30 billion
(a)
Define the term Gross National Product (GNP). [1 mark]
(b)
Using the data above, calculate Vietnam's GNP. [1 mark]
(c)
Explain how an increase in government spending on infrastructure (Policy X) could cause Vietnam's GNP to rise by less than its GDP. [2 marks]
Solutions
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