What does the income approach to GDP add together?

Wages, rent, interest and profit, plus depreciation, so that the income of every factor of production is counted once.

How is the GDP deflator calculated?

Nominal GDP divided by real GDP, multiplied by 100; a rising index means the overall price level is rising.

S4 Economics National Income Practice Paper 2 | Income approach, deflator and per-capita GDP, 10 questions with answers

2026-11-01

The second set of ten national income questions, from the income approach and the GDP to GNP conversion through the deflator, real growth and per-capita GDP, each with an answer and a one-line explanation.

Direct answers This paper has 10 questions covering the income approach, the GDP and GNP conversion, the GDP deflator and per-capita 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 main categories of income does the income approach to GDP add together?
FoundationHow do you convert between GDP and GNP?
FoundationWhat is the formula for the GDP deflator?
IntermediateConsumption is HK$200 billion, investment HK$50 billion, government spending HK$40 billion, exports HK$90 billion and imports HK$80 billion. What is GDP by the expenditure approach?
IntermediateWages are HK$180 billion, rent HK$40 billion, interest HK$30 billion, profit HK$40 billion and depreciation HK$10 billion. What is GDP by the income approach?
IntermediateFollowing the previous question, if net factor income from abroad is +HK$15 billion, what is GNP?
IntermediateNominal GDP is HK$300 billion and the deflator is 120. What is real GDP?
ChallengeReal GDP rises from HK$240 billion to HK$250 billion. What is the real growth rate?
ChallengeGDP is HK$300 billion and the population is 6 million. What is per-capita GDP?
Error redoWhat is wrong with the claim that GDP counts the value of intermediate products as well?

03 Answers and one-line notes

#	Answer	One-line note
1	Wages, rent, interest and profit, plus depreciation.	Adding the income of all factors of production gives GDP.
2	GNP = GDP + net factor income from abroad.	Income residents earn abroad counts in GNP but not in GDP.
3	Nominal GDP / real GDP x 100.	A rising index means the overall price level is rising.
4	HK$300 billion.	200 + 50 + 40 + 10, with net exports of HK$10 billion.
5	HK$300 billion.	It matches the expenditure figure, as the two approaches must give the same total.
6	HK$315 billion.	300 + 15, because income earned abroad exceeds what foreign firms earn here.
7	HK$250 billion.	300 divided by 1.2 removes the price increase.
8	About 4.2%.	The increase of HK$10 billion divided by the original HK$240 billion, times 100%.
9	HK$50,000.	300 billion divided by 6 million; compare living standards with real figures.
10	GDP counts only final products; intermediate value is already inside the final price, so counting it again would overstate GDP.	The value-added approach avoids double counting.

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.

Work through the ten questions, then compare each answer with the one-line explanation.Tutor Registration →

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