Documented Problem Solving: Gross Domestic Product Versus Gross National Product

Linda Wilson, The University of Texas at Arlington
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Initial Publication Date: September 27, 2010

Summary

The topic of gross domestic product (GDP) was introduced in class. The components of GDP - consumption, investment, government spending, and net exports - were discussed. The items that are excluded from GDP and the difference between GDP and gross national product (GNP) were also explained.

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Learning Goals

Students will:

  • recall the definition of GDP;
  • recall the definition of GNP;
  • recognize the components of GDP;
  • determine which activities are part of GDP and which are not.

Context for Use

This activity is appropriate for a Principles of Economics course, and can be used as a review in upper level courses. It will work at any size or type of institution. In writing the documented problem solution, the emphasis is on the process students employ versus the correct answer.

Description and Teaching Materials

A MC, T/F or short answer question can be used for this activity. Below is an example.

Which of the following is not included in U.S. GDP?
a) A tractor produced by a U.S. company operating in Central America.
b) A motorcycle made by a Japanese company located in Texas.
c) Chocolate candy produced in California and purchased by a Chinese tourist.
d) Wheat grown in Illinois and exported to Europe.

Answer: a

Teaching Notes and Tips

Understanding the difference between GDP and GNP is sometimes difficult for students. By having them separate the production of goods into two groups - goods that are domestically produced (or produced in the U.S.) versus goods that are produced outside the U.S. using U.S. factors of production - they should become more confident about the concepts.

Assessment

The focus of this assignment is for students to think about and document their thought process as they solve this question. Below is a rubric that the instructor or students might use to determine if there are any flaws in their thought process.

  1. Review or think about the definition of GDP.
  2. Review or think about the definition of GNP.
  3. Determine the difference in GDP and GNP, focusing on the part of GDP that states "goods or services that are domestically produced."
  4. Think about and analyze the four options given in the question.
  5. If the production occurs within the U.S. then it is part of GDP.
  6. Since Texas, California, and Illinois are within the U.S., the production is domestic.
  7. Since the motorcycles are produced outside the U.S. (Central America), this production isn't included in GDP.

References and Resources

Angelo, T.A. and Cross, K.P. (1993). Classroom Assessment Techniques: A Handbook for College Teachers. San Francisco: Jossey-Bass.