Photo AI
4. (a) (i) Explain what is meant by the term ‘National Income’ - Leaving Cert Economics - Question 4 - 2006
Question 4
4. (a) (i) Explain what is meant by the term ‘National Income’. (ii) In Ireland at present, would you expect GNP to be greater than, equal to, or less than, GDP? E... show full transcript
Worked Solution & Example Answer:4. (a) (i) Explain what is meant by the term ‘National Income’ - Leaving Cert Economics - Question 4 - 2006
Step 1
Explain what is meant by the term ‘National Income’
Answer
National Income refers to the total income earned by the residents of a country from various economic activities, which include wages, profits, rents, and interests, during a specific period, usually one year. It represents the economic performance of a nation and encompasses all incomes generated within the nation's borders, as well as income received from abroad, minus any income paid to foreign entities.
Step 2
In Ireland at present, would you expect GNP to be greater than, equal to, or less than, GDP? Explain your answer.
Answer
In Ireland at present, we would expect GNP to be less than GDP. This is primarily due to the negative Net Factor Income from the Rest of the World. There are several contributing factors:
-
The repatriation of profits by multinational companies operating in Ireland often exceeds the incoming profits from Irish companies operating abroad.
-
The repayments that are made regarding the foreign element of our national debt can also affect this balance.
-
Additionally, the remittances sent by immigrants in Ireland to their families abroad further dilute the income attributable to the Irish economy in GNP terms. Therefore, considering these factors, GNP is indeed less than GDP at this point in time.