Theory question 101
National IncomeA hypothetical national income data for a country in a particular year is presented below.
Item | $ Million
Wages and salaries | 250
Income paid abroad | 75
Income from self employment | 120
Stock appreciation | 5
Interest | 10
Income received from abroad | 50
Rent | 25
Depreciation allowance | 3
Royalties | 2
Profits and dividends | 35
From the data above, answer the following questions. Calculate the: (a) Gross Domestic Product (GDP); (b) Gross National Product (GNP); (c) Net National Product (NNP)
Show the model answer
(a) GDP (income method) = wages 250 + self-employment 120 + interest 10 + rent 25 + royalties 2 + profits 35 − stock appreciation 5 = $437 million
(b) GNP = GDP + income from abroad − income paid abroad = 437 + 50 − 75 = $412 million
(c) NNP = GNP − depreciation = 412 − 3 = $409 million
Stock appreciation is a price gain, not output, so it is subtracted.