Social Science : Economics : Chapter 1 : Gross Domestic Product and its Growth: an Introduction
I. Choose the Correct Answer:
1. GNP equals ________
- NNP adjusted for inflation
- GDP adjusted for inflation
- GDP plus net property income from abroad
- NNP plus net property income or abroad
Ans : GDP plus net property income from abroad
2. National Income is a measure of ________
- Total value of money
- Total value of producer goods
- Total value of consumption goods
- Total value of goods and services
Ans : Total value of goods and services
3. Primary sector consist of ________
Ans : Agriculture
4. ________ approach is the value added by each intermediate good is summed to estimate the value of the final good.
- Expenditure approach
- Value added approach
- income approach
- National Income
Ans : Value added approach
5. Which one sector is highest employment in the GDP.
- Agricultural sector
- Industrial sector
- Service sector
- None of the above.
Ans : Agricultural sector
6. Gross value added at current prices for services sector is estimated at ________ lakh crore in 2018-19.
Ans : 92.26
7. India is ________ larger producer in agricultural product.
Ans : 2nd
8. India’s life expectancy at birth is ________ years.
Ans : 65
9. Which one is a trade policy?
- irrigation policy
- import and export policy
- land-reform policy
- wage policy
Ans : Import and export policy
10. Indian economy is
- Developing Economy
- Emerging Economy
- Dual Economy
- All the above
Ans : Developing Economy
II. Fill in the blanks:
1. ________ is the primary sector in India
Ans : Agricultural sector
2. GDP is the indicator of ________ economy.
Ans : Health of a nation’s
3. Secondary sector otherwise called as ________.
Ans : Industrial
III. Match the following:
|1. Electricity/ Gas and Water||National Income / Population|
|2. Price policy||Gross Domestic Product|
|3. GST||Industry Sector|
|4. Per capita income||Agriculture|
|5. C + I + G + (X-M)||Tax on goods and service|
Ans: 1 – B, 2 – D, 3 – E, 4 – A, 5 – C
V. Answer the following in brief:
1. Define National income.
- National Income is a measure of the total value of goods and services produced by an economy over a period of time, normally a year’.
- National Income is called as Gross National Product (GNP) or National Dividend.
2. What is meant by Gross Domestic Product?
- Gross Domestic Product (GDP) is the total value of output of goods and services produced by the factors of production within the geographical boundaries of the country.
- It represents the economic health of country.
3. Write the importance of Gross Domestic Product.
- Study of Economic Growth
- Unequal distribution of wealth
- Problems of inflation and deflation
- Estimate the purchasing power
- Public Sector
- Guide to economic planning
4. What is Per Capita Income?
Per Capita Income (PCI) or output per person is an indicator to show the living standard of people in a country. It is obtained by dividing the national income by the population of the country.
Per Capita Income = National Income / Population
5. Define the value added approach with example.
- In the value added approach the value added by each intermediate goods is summed to estimate the value of the final goods.
- The sum of the value added by all the intermediate goods used in production gives us the total value of the final goods produced in the economy.
- To measure the market value of a cup of tea is, to add the value of each intermediate goods used to produce it such as tea powder, milk and sugar.
6. Name the sectors contribute to the GDP with examples.
|1) Primary sector||Agriculture, cattle farm, mining, forestry, etc.|
|2) Secondary sector||Iron and steel industry, cotton textile, jute, sugar, cement|
|3) Tertiary sector||Scientific research, postal and Telegraph, banking, education, etc.|
7. Write a short note
1) Gross National Happiness (GNH)
2) Human Development Index (HDI).
Gross National Happiness (GNH):-
The term GNH was coined in 1972 by a British journalist. The then king of Bhutan included it in the constitution of Bhutan. Thus it was enacted on 18 July, 2008 as the goal of the Government of Bhutan.
The four pillars of GNH:
- Sustainable and equitable socio-economic development
- Environmental conservation
- Preservation and promotion of culture.
- Good governance.
The nine domains of GNH:
- Psychological well-being
- Time use
- Cultural diversity
- Good governance,
- Community vitality
- Ecological diversity
- Living standards.
In 2011, the UN General Assembly urged the member nations to follow the example of Bhutan and measure happiness and well being and calling happiness a “Fundamental human goal”.
Human Development Index (HDI):-
In 1990 Mahbub ul Hag, a Pakistani Economist at the United Nations, introduced the Human Development Index.
It is a composite index of
- life expectancy at birth
- adult literacy
- Standard of living
India’s HDI level:
- India’s HDI value for 2017 is 0.640.
- Between 1990 and 2017, HDI increased nearly 50% – an indicator of achievement in lifting millions of people out of poverty.
- Between 1990 and 2017, the life expectancy at birth too increased by nearly 11 years with even more significant gains in expected years of schooling.
VI. Answer the following in detail:
1. Briefly explain various terms associated with measuring of national income
National Income is a measure of the total value of goods and services produced by an economy over a period of time, normally a year. It is also called as National Dividend.
Gross National Product (GNP)
Gross National Product is the total value of (goods and services) produced and income received in a year by domestic residents of a country. It includes profits earned from capital invested abroad.
|GNP||= C+1+G+(X-M) + NFIA|
|G||= Government Expenditure|
|X-M||= Export — Import|
|NFIA||= Net Factor Income from Abroad|
Gross Domestic Product (GDP)
Gross Domestic Product (GDP) is the total value of output of goods and services produced by the factors of production within the geographical boundaries of the country.
Net National Product (NNP)
Net National Product(NNP) is arrived by making some adjustment with regard to depreciation. We arrive the Net National Product (NNP) by deducting the value of depreciation from Gross National Product.
NNP = GNP – Depreciation
Net Domestic Product (NDP)
Net Domestic Product (NDP) is a part of Gross Domestic Product, Net Domestic Product is obtained from the Gross Domestic Product by deducting the quantum of tear and wear expenses (depreciation)
NDP = GDP – Depreciation
Per Capita Income (PCI)
Per capita Income or output per person is an indicator to show the living standard of people in a country. It is obtained by dividing the National Income by the population of a country.
Per capita Income = National Income / Population
Personal Income (PJ)
Personal income is the total money income received by individuals and households of a country from all possible sources before direct taxes, therefore, personal income can be expressed as follows
(PI = NI corporate Income Taxes – Undistributed corporate profits – social security contribution + Transfer payment).
Disposable Income (DI)
Disposable income means actual income which can be spent on consumption by individuals and families, thus, it can be expressed as DPI = PI — Direct Taxes
(From consumption approach DI = Consumption Expenditures + Savings )
2. What are the methods of calculating Gross Domestic Product? and explain them.
In this method GDP is measured by adding the expenditure on all the final goods and services produced in the country during a specific period.
The income Approach:
In this method GDP is calculated from the perspective of the earnings of the men and women who are involved in producing goods and services.
Y = wages + rent + interest + profit
Value added Appreach:
In this method GDP is calculated by including the values of intermediate goods to estimate the value of final goods.
|Tea Powder + Milk+ Sugar / Intermediate goods||= Tea↓Final good|
3. Write about the composition of GDP in India
- Agricultural operations are undertaken.
- Allied activities of production of raw materials are concentrated .
Examples : Agriculture, cattle farm, fishing, mining, forestry, corn, coal
- Tt is an industrial sector.
- Commodities are produced by transforming the raw materials.
Examples: Tron and steel industry, cotton textile, jute, sugar, cement, paper, petrochemical, automobile and small scale industries.
- Tt is known as service sector.
Examples: Service of Government, Scientific research, Transport, communication, trade, postal and telegraph, banking, education, entertainment, healthcare and information technology.
4, Write the differences between the growth and development
|Definition / Meaning||It is the positive quantitative change in the output of an economy in a particular time period||It considers the rise in the output in an economy along with the advancement of HDI index which considers a rise in living standards, advancement in technology and overall happiness index of a nation.|
|Concept||Economic growth is the “Narrower” concept||Economic development is the “Broader” concept|
|Nature of Approach||Quantitative in nature||Qualitative in nature|
|Scope||Rise in parameters like GDP, GNP, FDI,FII etc.||Rise in life expectancy rate, infant, improvement in literacy rate, infant mortality rate and poverty rate etc.|
|Term / Tenure||Short term in nature||Long-term in nature|
|Applicability||Developed nation||Developing economies|
|Measurement Techniques||Increase in national income||Increase in real national income i.e. per capita income|
|Frequency of Occurrence||In a certain period of time||Continuous process|
|Government Aid||It is an automatic process so may not require government support/aid or intervention||Highly dependent on government intervention as it includes widespread policies changes so ithout government intervention it is not possible|
5. Explain the following economic policies Synopsis:
- Agricultural policy
- Industrial policy
- New Economic policy
- Agricultural policy is the set of government decisions and actions relating to domestic agriculture and imports of foreign agricultural products.
- The goal of agricultural policies is achieving a specific outcome in the domestic agricultural product markets.
Some agricultural policies:
- Price policy
- Land reform policy
- Green Revolution
- Irrigation policy
- Food policy
- Agricultural labour policy
- Co- operative policy
- It is an important aspect of any economy.
- It creates employment.
- It promotes research and development
- It leads to modernization and makes the economy self-sufficient.
- It is closely related to development of trade.
Some industrial policies:
- Textile industry policy
- Sugar industry policy
- Price policy of industrial growth
- Small scale industrial policy,
- Industrial Labour policy
New Economic policy:-
It aims to make the Indian economy fastest developing economy in the globe.
Some economic reforms:
New model economic reforms such as Liberalisation, Privatisation and Globalisation. These economic reforms had influenced the overall economic growth of the country in a significant manner.
- Trade policy (Import and Export policy [International trade policy] and Domestic trade policy)
- Employment policy
- Currency and Banking policy
- Fiscal and Monetary Policy
- Wage policy
- Population Policy