What is the difference between GDP and GNP?

GDP is calculated by place of production and GNP by resident status, so production by foreign firms in Hong Kong counts in Hong Kong GDP but not in Hong Kong GNP.

Why compare years using real GDP rather than nominal GDP?

Real GDP removes price changes, so a rise reflects more output rather than higher prices.

S4 Economics National Income Practice Paper 1 | GDP definition, measurement and limitations, 10 questions with answers

2026-11-01

Tutor Prep Guide · Secondary Economics

Ten national income questions, from the GDP definition through the expenditure approach, real GDP, per-capita GDP and statistical limitations, each with an answer and a one-line explanation.

Direct answers This paper has 10 questions covering the GDP definition, the three approaches to measurement, the nominal and real distinction, and the limitations of GDP; suggested time is 20 minutes.

01 Paper details (check answers afterwards)

Item	Detail
Questions	10
Suggested time	20 minutes
Difficulty mix	Foundation 3 · Intermediate 4 · Challenge 2 · Error redo 1
Chapter	S4 Economics: National Income
Level	S4 (DSE)

02 Questions (10 items)

FoundationWhich three elements make up the definition of gross domestic product (GDP)?
FoundationWhat is the difference between GDP and GNP?
FoundationWhat is the difference between nominal GDP and real GDP?
IntermediateConsumption is HK$150 billion, investment HK$40 billion, government spending HK$30 billion, exports HK$80 billion and imports HK$70 billion. What is GDP by the expenditure approach?
IntermediateHow are net exports treated in the expenditure approach?
IntermediateNominal GDP is HK$230 billion and the price index is 115. What is real GDP approximately?
IntermediateGDP is HK$230 billion and the population is 5 million. What is per-capita GDP?
ChallengeGDP rises from HK$200 billion to HK$230 billion. What is the GDP growth rate?
ChallengeAre a resold second-hand flat and a social security payment counted in this year’s GDP?
Error redoWhat is wrong with the claim that a rise in GDP means everyone’s living standard has improved?

03 Answers and one-line notes

#	Answer	One-line note
1	A territory, a period of time, and the market value of all final goods and services.	All three elements are required, and intermediate products are left out.
2	GDP is calculated by place of production; GNP is calculated by resident status.	Production by foreign firms in Hong Kong counts in Hong Kong GDP, not in Hong Kong GNP.
3	Nominal GDP is measured at current prices; real GDP has price changes removed.	Compare output across years using real GDP.
4	HK$230 billion.	150 + 40 + 30 + 10, with net exports of HK$10 billion.
5	Exports minus imports, which may be positive or negative.	Imports are not produced locally, so they are deducted.
6	About HK$200 billion.	230 divided by 1.15, that is, revalued at base-period prices.
7	HK$46,000.	230 billion divided by 5 million gives average output per person.
8	15%.	The increase of HK$30 billion divided by the original HK$200 billion.
9	Neither is counted.	The flat was counted when it was built, and the payment is a transfer payment.
10	GDP does not reflect income distribution, environmental costs or leisure; per-capita figures come closer to living standards.	Living standards need per-capita GDP alongside other indicators.

04 What to do after marking

After marking, redo only the wrong items and write down which step went wrong (formula, unit, or misread number).
Repeat the same item two days later; move to the next paper only when both attempts are correct.
Parents only need the answer and note columns; there is no need to explain every item.

Attempt all ten questions first, then check each answer against its one-line explanation.Tutor Registration →

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