Answered: Suppose there are only two small…

Economics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506725

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter16: Creating An Environment For Growth And Prosperity

Section: Chapter Questions

Problem 14CQ

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Suppose there are only two small countries in the world: Ascot, with a population of 30,000 people, and Delwich, with a population of 20,000 people. Ascot’s GDP is equal to $150 million, while Delwich’s GDP is $250 million. Delwich’s GNP has been estimated to be equal to $280 million. Use this information to calculate Ascot’s GNP, the GDP per capita in Ascot, and the GNP per capita in Delwich.

Expert Solution

Step 1

Gross domestic product or GDP helps in finding the total value of goods and services within a particular geographical location. GNP or gross national product on the other hand helps in measuring the income earned by different individuals in a particular country irrespective of the location in which the goods or services are produced. While GDP helps in understanding the economy's strength, GNP helps to know the extent to which the citizens contribute for the economic development.