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Economy - Basics of Economy (GDP) Video Lecture | Economy for UPSC 2024 (Pre & Mains)
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FAQs on Economy - Basics of Economy (GDP) Video Lecture - Economy for UPSC 2024 (Pre & Mains)
| 1. What is GDP and why is it important in understanding the economy? |  |
Ans. GDP, or Gross Domestic Product, is a measure of the total value of all goods and services produced within a country's borders in a specific period. It is an important indicator of a country's economic performance and is used to assess the size and growth of an economy. GDP helps policymakers, investors, and analysts in making decisions related to economic planning, monetary policy, and investments.
| 2. How is GDP calculated and what are the different approaches to calculating GDP? | |
Ans. GDP can be calculated using three different approaches: the production approach, the income approach, and the expenditure approach.
- The production approach calculates GDP by summing the value added at each stage of production across all industries.
- The income approach calculates GDP by summing all the incomes earned by individuals and businesses in the economy, including wages, rents, profits, and interest.
- The expenditure approach calculates GDP by summing all the spending on goods and services in the economy, including consumption, investment, government spending, and net exports.
| 3. What are the limitations of GDP as a measure of economic well-being? | |
Ans. While GDP is a widely used measure of economic activity, it has certain limitations. It does not take into account factors such as income inequality, distribution of wealth, non-market activities (such as household work), and environmental sustainability. GDP also fails to capture the quality of life, happiness, and overall well-being of the population. Therefore, it is important to consider other indicators and measures alongside GDP to have a more comprehensive understanding of an economy.
| 4. How does GDP growth affect individuals and businesses? | |
Ans. GDP growth has various impacts on individuals and businesses. When the economy is growing, businesses tend to experience higher sales, increased profits, and expansion opportunities. It also creates job opportunities and reduces unemployment rates, leading to improved income and living standards for individuals. Additionally, GDP growth often results in increased investment in infrastructure, education, healthcare, and other public services, benefiting the overall society.
| 5. How does GDP differ from GNP? | |
Ans. GDP (Gross Domestic Product) measures the total value of all goods and services produced within a country's borders, regardless of whether the production is done by domestic or foreign entities. On the other hand, GNP (Gross National Product) measures the total value of all goods and services produced by the country's residents, regardless of where the production takes place. GNP includes income earned by residents abroad and excludes income earned by foreign residents within the country. Therefore, GDP focuses on production within the country, while GNP focuses on income earned by the country's residents.
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