Question

Write short notes on the following:

(a) GDP and GNP

(b) Attributes of money

(c) Imported inflation

(d) Per capita income and human development index.

Answer 1

(a) GDP and GNP

GDP:

Gross Domestic Product or simply GDP means the market value of all the goods, products, and services produced with in a county during a specific period, normally the financial year of a country. GDP is the aggregate demand in an economy. In short, GDP is the total of output of all sectors of the economy that are: agriculture, mining, etc. (primary sector); manufacturing and construction (secondary sector); and tertiary sector (services). In GDP, GDP per capita is often considered an indicator of a country’s standard of living, though it is not a measure of personal income. However, GDP doesn’t include services and products that are produced by the nation in other countries. In other words, GDP measures products only produced domestically.

GNP:

Gross National Product or simply (GNP) referrers to the GDP plus any income earned by resident of a country from overseas investment, minus income earned by overseas residents with the domestic economy. In short, we can say that GNP is the production of the citizens of a country only, wherever they are living. GNP is used to measure how the nationals of a country are contributing economically. So if an American States citizen is living abroad and he earned some income there then this income will be the part of American GNP instead of GDP.

(b) Attributes of money

It is a very broad question and requires a lot of different perspectives. I will try to touch a few in short. History has demonstrated that concept of God basically depends on the religion and philosophers. Some of them accepted the notion of God while some rejected it and finally there were some who remained indifferent to the concept as such. But we will take the general approach and will try to avoid specification.
Generally God is taken to be an abstract entity and Money is associated with something tangible and materialistic. From the beginning, every philosophers have talked about Summum Bonum. Summum Bonum means the ultimate good according to which values and priorities are established in an ethical system. When we follow abstractionism then we tend to put it at the centr of happiness and here the God is referred as the Ultimate, the transcendental. All our efforts are directed to reach that ultimate reality and any form of materialism is discarded. But when we keep Humanism as our summum bonum then our attentions tend to be toward fulfilling the humanistic needs and materialistic need is one of them. Here the role of money gains prominence.
There is one more view that all these tangible and intangible concepts were a mere tool defined and designed to keep the world power in the hands of few. For eg. Some propagators of abstractionism may declare that people who will obey their orders will only reach the ultimate reality . From this point of view both God and Money are playing the same role of an instrument to be utilised by those who want to keep the powers in their hands.

(c) Imported inflation

“Imported inflation” is an idiom for the countries whose production mostly depend on imports. This is a situation where a rise in inflation is caused not only by an increase in aggregate demand or output, but it can also be caused by the nation’s currency’s value loss or any other event occured in international markets.

Here’s an example:

You’re a country which only produces cars. What you do is importing a car door, a motor and all other sorts of components of an average car from a foreign country, and then compounding them for the export of those cars. Brand is yours, you’re selling the final good, but you’re buying all your intermediate goods from outside.

Here’s what can happen:

1. Steel prices in the foreign country can rise, making the price of intermediate goods you’re purchasing to increase. This will increase the input cost of your production, hence, inflation.
2. Your currency may lose value against that foreign country. If your currency is low in value against the currency of the country from which you’re importing, then the intermediate goods you’re importing will have higher prices than before. Hence, inflation.

These are 2 simple examples of what you call imported inflation.

Other than these examples, you can think of it more realistically. For example, you have also other car companies domestically, as substitutes to your main car company. If one or two cars’ prices increase, other company’s prices will also change accordingly due to the conditions of competition.

(d) Per capita income and human development index.

Human development index is developed by UNDP and published yearly on the basis of three parameters in the country. i.e., 1)Per capita income of the people adjusted to purchasing power parity (PPP)
2)literacy rate (2/3rd is for gross enrollment & 1/3rd is Higher education)
3)Life expectancy of the people

The HDI is calculated as a geometric average of indices in three different dimensions: health, education, and standard of living. Each dimension index is calculated according to where each country’s actual value lies within a range built into the index. Each dimension index receives an equal weight of one third in calculating the overall HDI.

The role played by per capita income in the HDI is deliberately reduced, first by capping the maximum value at $75,000 per year (a minor adjustment that affects only a few countries), and second (and more substantially) by calculating the living standard dimension index as the square root of per capita GNI. This builds in the designer’s judgment that the marginal contribution of income growth to human well-being declines as income levels rise.