Economic Growth Measurement: GDP and GNP

Study Notes

Economic Growth Measurement

Gross Domestic Product (GDP) measures the total market value of final goods and services produced in a country in a specific period.
Gross National Product (GNP) measures the total market value of all final goods and services produced by a country's citizens, regardless of their location.
Nominal GDP measures GDP in current prices, unadjusted for inflation.
Real GDP measures GDP in constant prices, adjusted for inflation using a base year.
Per Capita GDP measures GDP per person, indicating the average level of income and living standards.

Problems with GDP

GDP ignores non-market activities such as unpaid work like housework, volunteering, or informal sector activities.
GDP ignores environmental degradation and resource depletion, not considering the negative impact of economic growth on the environment.
GDP ignores distribution of income, only showing the total output, not how it is distributed among the population.
GDP can be influenced by non-productive activities that do not contribute to overall welfare, such as military spending or crime.

Factors Affecting Economic Growth

Human Capital: education, skills, and health of the workforce contribute to economic growth.
Physical Capital: infrastructure, machinery, and equipment are essential for growth.
Natural Resources: land, minerals, and energy resources are crucial for growth.
Technology: innovation, research, and development drive economic growth.
Institutions: a legal framework, property rights, and governance are necessary for growth.
Political Stability: a stable political environment and peaceful transitions are essential for growth.

Strategies for Development

Increase productivity by improving efficiency, innovation, and technology.
Invest in human capital through education, healthcare, and training.
Encourage saving and investment by providing incentives and reducing government debt.
Promote trade and foreign investment by opening up the economy to international markets and attracting foreign companies.
Control population growth by promoting family planning and investing in education and healthcare.
Reduce poverty and inequality by implementing policies that ensure equal opportunities and social safety nets.
Focus on sustainable development by considering environmental sustainability and intergenerational equity.
Promote good governance by ensuring transparency, accountability, and rule of law.

Description

This quiz covers concepts related to measuring economic growth, including Gross Domestic Product (GDP), Gross National Product (GNP), Nominal GDP, and Real GDP. Understand the differences between these measures and how they relate to money.