|Consider the following:|
|1. In a closed economy no distinction is to be made between Gross National Product and Gross Domestic Product.|
|2. In an economy open to foreign trade. Gross National Product may be greater or less than Gross Domestic Product depending upon the net inflow or outflow of income. Which of these statements is/are correct?|
A) Only 1
B) Only 2
C) Both 1 and 2
D) neither 1 nor 2
Correct Answer: C
Solution :[c] A closed economy is self-sufficient; meaning that no imports are brought in and no exports are sent out. The goal is to provide consumers with everything that they need from within the economy's borders. A closed economy is the opposite of an open economy, in which a country will conduct trade with outside regions. Gross Domestic Product (GDP) is calculated either by measuring all income earned within a country, or by measuring all expenditures within the country, which should approximately be the same. Gross National Product (GNP) uses GDP, but adds income from foreign sources, less income paid to foreign citizens and entities.
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