Theory question 108
National IncomeExplain the following National Income concepts: (a) Gross Domestic Product (GDP); (b) Gross National Product (GNP); (c) Cost of living; (d) Per Capita income; (e) Standard of living.
Show the model answer
(a) GDP: the total money value of all final goods and services produced within a country's borders in a year, by both citizens and foreigners.
(b) GNP: the total money value of all final goods and services produced by a country's citizens and their firms at home and abroad in a year; GDP + net factor income from abroad.
(c) Cost of living: the amount of money needed to buy the goods and services a person or family needs to maintain a given standard of living over a period.
(d) Per capita income: national income divided by the population; average income per person.
(e) Standard of living: the level of material well-being of people, measured by the quantity and quality of goods and services they enjoy (food, housing, health, education).
GDP is about location; GNP is about ownership by citizens.