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V. Answer the following questions:

I.What are the two basic functions of national-income accounting?

  1. How can we determine last year's GNP?

  2. What is GNP per capita used for?

  3. What is the easiest way to calculate GNP?

  4. What is the difference between nominal GNP and real GNP?

  5. What is inflation?

  6. What do our production possibilities depend on?

  7. Where is the distinction between GNP and NNP mirrored?

  8. What represents net exports?

VI. Define the terms:

national-income accounting real GNP

nominal GNP gross national product {GNP)

inflation GNP per capita

net national product (NNP) depreciation

VII. Translate into English:

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VIII. Read and dramatize the following dialogue:

5.; As a future economist you ought to know certain things

about gross national product. S..- That's what I want. I hope to make my career in economics. S.: What do you know about GNP?

110

B-: GNP is the total market value of all final goods and services produced in a given time period.

S.: It is something. But you should distinguish between nominal GNP and real GNP.

B.: What do you mean by that?

S.: Nominal GNP is the value of final output produced in a given period, measured in the prices of that period, whe­reas real GNP is the value of output measured in constant

prices.

B.: Although prices serve as a convenient measure of market value, they can also distort our perceptions of real output.

$.: You are right. Imagine what would happen to our cal­culations of GNP if all prices were to double from one year to the next. Suppose, for example, that the price of oranges rose from 20 cents to 40 cents, the price of bicycles to 100 dollars and the price of airplanes to 2 million dollars

each.

8.; How would such price changes affect this year's GNP?

5.: Obviously, the price increases would double the value of final output. Measured GNP would rise from 1.400 million dollars to 2.800 million dollars. Such a rise in GNP does not reflect an increase in the quantity of goods and services available to us. We are still producing the same quantities only the prices of those goods have changed.

B.: Now I understand, changes in GNP brought about by changes in the price level can give us a distorted view of economic reality.

$.: Surely we would not want to assert that our standard of living had improved just because price increases raised measured GNP from 1.400 million dollars to 2.800 million

dollars.

6..- Thank you very much for your help. It's very useful in­formation.

S.: Not at all. See you later.

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