Question

	Question 4:

1. Define GDP.

2. In Canada, many children receive day-care from commercial providers. In parts of Africa, day-care commercial providers are often unknown as children are almost all cared for by relatives. How would this difference affect comparisons of GDP per person?

3. Explain why the HDI might be better than real GDP as a measure of economic welfare.

4. Suppose that Canadian mining companies purchase German-made ore trucks at a reduced price. By itself what will this do to the GDP deflator and the consumer price index?

Answer 1

Hi,

I hope you are doing well!

Question:

Answer:

GDP:

GDP (Gross Domestic Product) is the sum of the market values, or prices, of all final goods and services produced in an economy during a period of time. GDP is a number that expresses the worth of the output of a country in local currency.

The following equation is used to calculate the GDP: GDP=C+I+G+(X−M)

W here,

C = (Private) consumption,

I= Fixed investment, change in inventories,

G = Government purchases (i.e. government consumption),

X-M = Net exports.

GDP Per Capita:

GDP per person is nothing but GDP per person, the country's GDP is divided by the total population. That makes it a good measurement of a country's standard of living. It tells you how prosperous a country feels to each of its citizens. So, Per capita measures reflect the relative state of a country's population. For example, China is now the second largest economy with a GDP of $16.6 trillion in 2017—around 40% lower than the United States. However, China has far more people than the United States, and so the per capita GDP for China was just $16,600.

GDP Per Person = GDP / Total Population.

So, the children receive day-care from commercial providers or by relatives - do not affect the comparison of GDP per peron. But its its makes it a good measurement of a country's standard of living. That means higher the GDP per person means higher the country's standard of living and vice-versa. In the some of the country the children receive day-care from relatives and in the country from corporate provides because of low income and tradition or culture. Like in India the children receive day-care from relative because of the family and social culture. But its also reflects the per person GDP difference. Higher GDP per person country prefer commercial provider and lower GDP per person country prefer relatives or other options.

HDI:

The Human Development Index HDI is defined as the composite statistics used to rank countries by levels of human development. The HDI is a measure of health, education and income. It measures the average achievements in a country in these three basic dimensions of human development, calculated into an index.

HDI is measuring achievements in each dimension ( life, education and income) whereas GDP only takes into consideration the income aspect and so HDI is definitely a better measure than GDP. The HDI measures each of these factors between 0 and 1, one being the best. The HDI is a very useful measure of development because it includes economic and social indicators which reduces any anomalies. GDP have a positive relationship with the HDI.

GDP Deflator:

In economics, the GDP deflator is a measure of the level of prices of all new, domestically produced, final goods and services in an economy in a year. The GDP deflator is a tool used to measure the level of price changes over time so that current prices can be accurately compared to historical prices.

The GDP deflator is calculated by dividing nominal GDP by real GDP and multiplying by 100. GDP Deflator Equation: The GDP deflator measures price inflation in an economy. It is calculated by dividing nominal GDP by real GDP and multiplying by 100.

CPI:

The Consumer Price Index (CPI) is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care. It is calculated by taking price changes for each item in the predetermined basket of goods and averaging them.

Although at first glance it may seem that CPI and GDP Deflator measure the same thing, there are a few key differences. The first is that GDP Deflator includes only domestic goods and not anything that is imported. This is different because the CPI includes anything bought by consumers including foreign goods. The second difference is that the GDP Deflator is a measure of the prices of all goods and services while the CPI is a measure of only goods bought by consumers.

Canadian mining companies purchase German-made ore trucks at a reduced price Then the transportation cost will affect positively. It will affect the cost and price of raw material/inputs and final goods also positively. It means low cost and low price reduce the CPI and Decrease the GDP deflator ( because it will increase the value of Real GDP).

Note: I HAVE DIVIDE THE ANSWERS IN DIFFERENS COLORS BECAUSE QUESTION'S NUMBERS ARE NOT CLEARLY MENTION IN THE QUESTION. EVERY COLOR IS SHOWING THE ANSWER OF DIFFERENT QUESTION IN THE SAME SEQUENCE (AS PER The QUESTION).

Thank You