Compare GDP per capita and GNI per capita; how do they differ in what they measure?

Compare GDP per capita and GNI per capita; how do they differ in what they measure?

• A. GDP per capita measures the value of goods and services produced within a country; GNI per capita adds net income from abroad to domestic production.
• B. GDP per capita measures social inclusion; GNI per capita measures environmental protection.
• C. GDP per capita equals GNI per capita by definition.
• D. GDP per capita measures income from abroad; GNI per capita measures domestic production.

Answer: (A)

The main idea is how income is counted relative to borders. GDP per capita measures the total value of goods and services produced inside a country’s borders, divided by the population. GNI per capita takes that a step further by adding the net income residents earn from abroad and subtracting income earned by non-residents domestically, effectively making it GDP plus net income from abroad, divided by population. This means GDP reflects domestic production regardless of who owns the production, while GNI reflects the total income earned by a country’s residents, including overseas earnings. If many residents work abroad or have investments abroad, GNI can exceed GDP. If foreign-owned production is large within the country, GDP can exceed GNI because profits go to foreign owners. The statement you selected captures this distinction accurately: GDP per capita is the value produced domestically, while GNI per capita adds net income from abroad to that domestic production. The other options misstate what GDP and GNI measure or claim they are the same by definition.

The main idea is how income is counted relative to borders. GDP per capita measures the total value of goods and services produced inside a country’s borders, divided by the population. GNI per capita takes that a step further by adding the net income residents earn from abroad and subtracting income earned by non-residents domestically, effectively making it GDP plus net income from abroad, divided by population.

This means GDP reflects domestic production regardless of who owns the production, while GNI reflects the total income earned by a country’s residents, including overseas earnings. If many residents work abroad or have investments abroad, GNI can exceed GDP. If foreign-owned production is large within the country, GDP can exceed GNI because profits go to foreign owners.

The statement you selected captures this distinction accurately: GDP per capita is the value produced domestically, while GNI per capita adds net income from abroad to that domestic production. The other options misstate what GDP and GNI measure or claim they are the same by definition.