Vous êtes sur la page 1sur 2

14 The measurement of national income (II)

Chapter Fourteen The measurement of national income (II)


Self-assessment Question

14.1 Yes! The increase in nominal GDP is composed of increase in price level and increase in real
GDP. If nominal GDP increases at the same percentage as real GDP, it means that the general
price level remains unchanged.

Multiple Choice Questions

* If you are using the ‘Third edition 2003’ edition, please note the items in italic in the following table
have been amended as shown. The amendment has been incorporated in the ‘First reprint 2003
(December)’ edition.

GNP components $
Private consumption expenditure 1,200
Government consumption expenditure 500
Depreciation allowance 200
Total exports* 1,000
Gross domestic fixed capital formation 350
Increase in inventory 50
Indirect taxes 350
Total imports* 800
Net income earned abroad 50

1 A 2 C 3 A 4 D 5 A
6 C

5 The estimation of GDP follows an international standard known as the System of National
Accounts. So, there does not exist the problem of using different approaches in the estimation of
GDP for international comparison of living standard.

Short Question

7 Not necessarily. The following factors have to be taken into account:

1) Size of population: the population of India is much larger than that of Hong Kong.

2) Composition of GDP: e.g. a significant proportion of India’s GDP is on military expenses,


which do not contribute to the living standard.

3) The distribution of GDP in India is highly unequal, with the rich taking up a great share of
the GDP. So the standard of living of an average citizen is not high.
4) The undesirable effects of production such as pollution and traffic congestion are serious in
India. So, the living standard of India is not high.

New Introductory Economics 3rd Edition 34 © Pearson Education Asia Limited 2003
Suggested Solutions (2004 reprint with minor amendments)
14 The measurement of national income (II)

Structured Essay Question

* If you are using the ‘Third edition 2003’ edition, please note the items in italic in the following table
have been amended as shown. The amendment has been incorporated in the ‘First reprint 2003
(December)’ edition.

GDP components (HK$ billion)


Private consumption expenditure 708.6
Government consumption expenditure 131.4
Gross domestic fixed capital formation 304.0
Change in inventories 3.8
Exports of goods 1,561.5
Imports of goods 1,601.5*
Exports of services 352.2*
Imports of services 188.8

8(a)(i) GDP = $(708.6 + 131.4 + 304.0 + 3.8 + 1,561.5 – 1,601.5 + 352.2 – 188.8) billion
= $1,271.2 billion
Net exports = $(1,561.5 – 1,601.5 + 352.2 – 188.8) billion = $123.4 billion

8(a)(ii) Size of population

8(a)(iii) Net factor income from abroad

8(b)(i) Hong Kong’s GDP will fall. The higher tax rates imposed by the USA will reduce Hong
Kong’s exports.

With a decreased export demand, production for exports will drop. This will lead to a
decrease in the GDP.

8(b)(ii) Hong Kong’s GDP will increase. When businessmen are optimistic about Hong Kong’s
economic and political future, they will increase their investment.

The increased investment demand will result in an increase in production, leading to an


increase in the GDP.

New Introductory Economics 3rd Edition 35 © Pearson Education Asia Limited 2003
Suggested Solutions (2004 reprint with minor amendments)