Gross Domestic Product And Its Growth An Introduction

Class 10 | Social Science — Economics | Unit 1

Class 10 Unit 1 Economics

To understand how the G D P tells us how India is doing, you should understand what GDP is. Imagine what happens in a hotel. You place an order for two Idlis and a cup of tea. Someone makes the idlis and tea and someone else serves you. Idlis and tea are produced. These are tangible, physical things you can touch and feel. Economists call such tangible items "goods". These goods are not free but have to pay or to be paid. Though you don't realise it in addition to these tangible things called goods, something else is being produced: the work done by the cooks and the people who serve the food. The activity of cooking and serving is not something you can feel and touch. Such activities are not tangible but are nevertheless crucial for you to enjoy the food. Economists call such activity "services". What happens every day in a hotel at nationwide: goods and services are produced and paid for and this what the G D P measures.

Unit – 1 Gross Domestic Product and its Growth: An Introduction

Learning Objectives

To know about the meaning of Gross Domestic Product
To Understand the basic various measures of National Income
To Understand the composition of GDP
To know the contribution of different sectors in GDP
To know the economic growth and development and its differences
To know about Development path based on GDP And Employment
To understand the growth of GDP and Economic Policies

DEFINITION OF G D P

The G D P is the market value of all the final goods and services produced in the country during a time period.

G D P is equal to C plus I plus G plus (X minus M)

C is equal to Consumption
I is equal to Investment
G is equal to Government Expenditure
(X minus M) is equal to X is equal to Exports minus M is equal to Imports

Every part of the definition is important:

Goods and services: As you know by now, goods are tangible items while services are activities which are intangible.

Market value: This is the price at which goods and services are sold in the market.

Final goods and services: Economists Tyler Cowen and Alex Tabarrok say that "final goods and services" are the goods and services which will be used or consumed. The goods and services which will be used for producing other goods and services and will form a part of the goods and services produced are called "intermediate goods". Only the final goods are included in the GDP. Intermediate goods are not counted in calculating the GDP because their value is included in the final goods. So, if the intermediate goods are included in the GDP it will result in what is called "double counting".

Example: A cup of tea bought in a hotel is a final good because it is consumed and does not form a part of producing something else. So, the market value of the cup of tea, being a final good, is included in the GDP. Sugar which is mixed in the tea is an intermediate good because it is used in making tea and forms a part of the tea served. Suppose the tea is priced Rupees 10 a cup, of which the value of sugar used is Rupees 2. So, the price of the cup of tea includes the Rupees 2 price of the spoon of sugar. If this value of sugar is included in the GDP, it will be counted twice: as a spoon of sugar and again as a part of the cup of tea. This is "double counting" and to avoid it the intermediate goods like sugar are excluded from GDP.

1.1 National Income

National Income

'National Income is a measure of the total money value of goods and services produced by an economy over a period of time, normally a year'. Commonly National Income is called as Gross National Product (GNP) or National Dividend.

Various terms associated with measuring of National Income

1. 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 is equal to C plus I plus G plus (X minus M) plus NFIA)
C is equal to Consumption
I is equal to Investment
G is equal to Government Expenditure
X minus M is equal to Export minus Import
NFIA is equal to Net Factor Income from Abroad)

2. 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.

3. Net National Product (NNP)
Net National Product (NNP) is arrived by making some adjustment with regard to depreciation that is we arrive the Net National Product (NNP) by deducting the value of depreciation from Gross National Product. (NNP is equal to GNP minus Depreciation)

4. 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 is equal to GDP minus Depreciation

5. 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 is equal to National Income divided by Population

Do You Know?

In 1867 to 68 for the first time Dadabhai Navroji had ascertained the Per Capital Income in his book "Poverty and Un - British Rule of India".

6. Personal Income (PI)
Personal income is the total money income received by individuals and households of a country from all possible sources before direct taxes.

7. 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 is equal to PI minus Direct Taxes
(From consumption approach DI is equal to Consumption Expenditures plus Savings)

1.2 Gross Domestic Product (GDP)

Produced in the country:

GDP of India includes only the market value of goods and services produced in India. For example, the market value of apples produced in Kashmir are included in our GDP since Kashmir is in India. The market value of apples produced in California, even if they are sold in Indian markets, are not included in our GDP because California is in the U.S.

Produced during a time period

The GDP of a country measures the market value of goods and services produced only during the specified time period. The goods and services produced in earlier periods are not included. In India the GDP is measured both annually and quarterly. The annual GDP is for a financial year which is from April 1st of say 2017 to March 31st 2018.

Do You Know?

The modern concept of GDP was first developed by Simon Kuznets for a US Congress report in 1934.

Methods of GDP Calculating

1. Expenditure Approach: In this method, the GDP is measured by adding the expenditure on all the final goods and services produced in the country during a specified period.
Y is equal to C plus I plus G plus (X minus M)

2. The Income Approach: This method looks at GDP from the perspective of the earnings of the men and women who are involved in producing the goods and services. The income approach to measuring GDP (Y) is
Y is equal to wages plus rent plus interest plus profit

3. Value-Added Approach: A cup of tea served to you in a hotel is a "final good". The goods used to produce it, tea powder, milk, and sugar, are "intermediate goods" since they form a part of the final good, the cup of tea. One way to measure the market value of the cup of tea is to add the value produced by each intermediate good used to produce it. 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.

Value added method
Tea powder plus Milk plus Sugar is equal to Tea
Value of intermediate goods is equal to Value of final goods

Importance of GDP

1. Study of Economic Growth.
2. Problems of inflation and deflation.
3. Comparison with developed countries of the world.
4. Estimate the purchasing power.
5. Study of Public Sector.
6. Guide to economic planning.

Limitations of GDP

1. Several important goods and services are left out of the GDP: The GDP includes only the goods and services sold in the market. The services provided by parents to their children is very important but it is not included in the GDP because it is not sold in the market. Likewise clean air, which is vital for a healthy life, has no market value and is left out of the GDP.

2. GDP measures only quantity but not quality: In the 1970s schools and banks did not permit the use of ballpoint pens. This is because the ones available in India were of very poor quality. Since then, not only has there been a substantial increase in the quantity of ballpoint pens produced in India but their quality has also improved a lot. The improvement in quality of goods is very important but it is not captured by the GDP.

3. GDP does not tell us about the way income is distributed in the country: The GDP of a country may be growing rapidly but income may be distributed so unequally that only a small percentage of people may be benefitting from it.

4. The GDP does not tell us about the kind of life people are living: A high level of per capita real GDP can go hand-in-hand with very low health condition of people, an undemocratic political system, high pollution and suicide rate.

Do you know?

Estimation of GDP
The Central Statistical Organisation (CSO), under the Ministry of Statistical department keeps the records. Its processes involve conducting an annual survey of industries and compilation of various indexes like the Index of Industrial Production (IIP) Consumer Price Index (CPI) etc.

1.3 Composition of Gross Domestic Product (GDP)

Indian economy is broadly divided into three sector

1) Primary Sector: (Agricultural Sector)
Agricultural sector is known as primary sector, in which agricultural operations are undertaken. Agriculture based allied activities, production of raw materials such as cattle farm, fishing, mining, forestry, corn, coal etc. are also undertaken.

2) Secondary Sector: (Industrial Sector)
Industrial sector is secondary sectors in which the goods and commodities are produced by transforming the raw materials. Important industries are Iron and Steel industry, cotton textile, Jute, Sugar, Cement, Paper, Petrochemical, automobile and other small scale industries.

3) Tertiary: (Service Sector)
Tertiary sector is known as service sector which includes Government, scientific research, transport communication, trade, postal and telegraph, Banking, Education, Entertainment, Healthcare and Information Technology exectra. In the twentieth century, economists began to suggest that, traditional tertiary services could be further distinguished from "quaternary" and "quinary" service sectors.

1.4 Contribution of different sectors in GDP of India

Services sector is the largest sector of India. Gross Value Added (GVA) at current prices for Services sector is estimated at 92.26 lakh crore in 2018to19.

Year	Agriculture (%)	Industry (%)	Service (%)
1950 to 51	51.81%	14.16%	33.25%
1960 to 61	42.56%	19.30%	38.25%
1970 to 71	41.95%	20.48%	37.22%
1980 to 81	35.39%	24.29%	39.92%
1990 to 91	29.02%	26.49%	44.18%
2000 to 01	23.02%	26.00%	50.98%
2010 to 11	18.21%	27.16%	54.64%
2011 to 12	17.86%	27.22%	54.91%
2012 to 13	17.52%	26.21%	56.27%
2013 to 14	18.20%	24.77%	57.03%
2015 to 16	17.07%	29.08%	52.05%
2016 to 17	17.09%	29.03%	52.08%
2017 to 18	17.01%	29.01%	53.09%

India is 2nd largest producer of agricultural products. India accounts for 7.39 percent of total global agricultural output. In Industrial sector, India's world rank is 6 and in Service sector, India's world rank is 8. Contribution of Agriculture sector in Indian economy is much higher than world's average (6.4%). Contribution of Industry and Services sector is lower than world's average 30% for Industry sector and 63% for Services sector.

Do You Know?

Gross value added (GVA) is the measure of the value of goods and services produced in an area, industry or sector of an economy. GVA is equal to GDP plus subsidies minus (direct, sales) taxes.

1.5 Economic Growth and Development

As per the economist Amartya Sen, economic growth is one aspect of economic development. Also, United Nation see it like this "Economic development focuses not only on man's materialistic need but it focuses on overall development or rise in its living standards.

Economic Growth

The key parameters of economic growth in any economy are its Gross Domestic Product (GDP) and gross national product which helps in measuring the actual size of an economy.

Economic Development

Economic development projects a broader picture of an economy which takes into account an increase in production level or output of an economy along with an improvement in the living standard of its citizens. It focuses more on socioeconomic factors rather than the just quantitative increase in production. Economic development is a qualitative measure which measures improvement in technology, labour reforms, rising living standards, broader institutional changes in an economy. Human development Index (HDI) is apt tool to measure the real development in an economy.

1.6 Developmental Path based on GDP and Employment

In the development path of India, it first undertook the policy of closed trade. This was to give a thrust to domestic industries and reduce dependence on foreign products and companies. Trade and interaction with the outside world remained limited. This outlook continued till 1991 when India finally decided to open its borders to free trade and liberalized its economy by allowing foreign companies to enter the Indian economy.

A thrust was given to employment generation under the Five-Year plans. This was to make up for a rising population and lacking jobs to absorb the increased workforce size. Rural development was also given importance in India, for the important constituent it was of the Indian landscape. Poverty alleviation came as a corollary of rural development and a part of the development path of India. India inherited a poverty-stricken economy from the British rule, which had destroyed its resource base completely

Differences between Economic Growth and Economic Development

Comparison	Economic Growth	Economic Development
Definition or 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 etcetera.	Rise in life expectancy rate, infant, improvement in literacy rate, infant mortality rate and poverty rate etc.
Term or 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 or aid or intervention	Highly dependent on government intervention as it includes widespread policies changes so without government intervention it is not possible

The public sector was given significant importance, Private companies and industries were subject to strict regulations and standards. It was believed that the government was the sole protector of the people and would work towards social welfare.

India has sustained rapid growth of GDP for most of the last two decades leading to rising per capita incomes and a reduction in absolute poverty. Per capita incomes have doubled in 12 years. In Per capita income, placing India comes just inside the Middle-Income Country category. Life expectancy at birth is 65 years and 44% of children under 5 are malnourished. The literacy rate for the population aged 15 years and above is only 63% compared to a 71% figure for lower middleincome countries.

India has followed a different path of development from many other countries.

Factors supporting Indian development

A fastgrowing population of working age is an important factor. There are 700 million Indians under the age of 35 and the demographics look good for Indian growth in the next twenty years at least. India is experiencing demographic transition that has increased the share of the workingage population from 58 percent to 64 percent over the last two decades.

India has a strong legal system and many Englishlanguage speakers. This has been a key to attracting inward investment from companies such as those specialising in Information Technology. India's economy has successfully developed in highly advanced and attractive clusters of businesses in the technology space. For example, witness the rapid emergence of Bangalore as a hub for global software businesses. External economies of scale have deepened their competitive advantages in many related industries.

Do You Know?

Human Development Index
In 1990 Mahbub ul Haq, a Pakistani Economist at the United Nations, introduced the Human Development Index (HDI). The HDI is a composite index of life expectancy at birth, adult literacy rate and standard of living measured as a logarithmic function of GDP, adjusted to purchasing power parity. India climbed one spot to 130 out of 189 countries in the latest human development rankings released today by the United Nations Development Programme (UNDP). Between 1990 and 2017, India's HDI value incased from 0.427 to 0.640, an increase of nearly 50 percent – and an indicator of the country's remarkable achievement in lifting millions of people out of poverty.

1.7 Growth of GDP and Economic Policies

Many Economic Policies have been framed by the Government of India since independence for increasing rate of economic growth and economic development. The important economic policies are

1. Agriculture policy
Agricultural policy is the set of government decisions and actions relating to domestic agriculture and imports of foreign agricultural products. Some overarching themes include risk management and adjustment, economic stability, natural resources and environmental sustainability research and development, and market access for domestic commodities. Some Agricultural policies are Price policy, land reform policy, Green Revolution, Irrigation policy, Food policy, Agricultural Labour Policy and Cooperative policy.

2. Industrial Policy
Industrial development is a very important aspect of any economy. It creates employment, promotes research and development, leads to modernization and ultimately makes the economy selfsufficient.

Gross National Happiness (GNH)

The term Gross National Happiness was coined in 1972 during an interview by a British journalist for the Financial Times at Bombay airport when the then king of Bhutan, Jigme Singye Wangchuck, said "Gross National Happiness is more important than Gross National Product. In 2011, The UN General Assembly passed Resolution "Happiness: towards a holistic approach to development" urging member nations to follow the example of Bhutan and measure happiness and wellbeing and calling happiness a "fundamental human goal."

The four pillars of GNH's are
1. sustainable and equitable socio-economic development
2. environmental conservation
3. preservation and promotion of culture
4. good governance.

The nine domains of GNH are psychological well-being, health, time use, education, cultural diversity and resilience, good governance, community vitality, ecological diversity and resilience, and living standards.

In fact, industrial development even boosts other sectors of the economy like the agricultural sector (new farming technology) and the service sector. It is also closely related to the development of trade. Several industrial policies have been enacted. Since 1948, Industrial policy on large scale industries Example. Textile Industry policy, Sugar Industry policy, Price policy of industrial growth, small scale industrial policy and Industrial Labour policy.

3. New Economic Policy
The economy of India had undergone policy in the beginning of the 1990s. This new model of economic reforms is commonly known as the LPG known as Liberalisation, Privatisation and Globalisation. These economic reforms had influenced the overall economic growth of the country in a significant manner.

SUMMARY

GDP is the value of all goods and services produced within an economy in a financial year. Indian economy is classified in three sectors Agriculture and allied Industry and Service

Depreciation: The Monetary value of an asset decreases over time due to use, wear and tear or obsolescence

Income: The amount of monetary or other returns, either earned or unearned, accruing over a period of time.

Gross Value Added (GVA): The measure of the value of goods and services produced in an area, industry or sector of an economy.

GLOSSARY

Depreciation The process of losing value தேய்மானம் Intermediate Being between two other related things இடைநிலை market Price A price that is likely to be paid for something சந்தை விலை Final Goods A consumer good or final good is any commodity that is produced consumed by the consumer to satisfy current wants or needs இறுதி பொருட்கள் composition the nature of somethings ingredients or constituents the way in which a whole or mixture is made up கலவை contribution a gift or payment to a common fund or collection பங்களிப்பு staggering continue in existence or operation uncertainly or precariously தடுமாற்றத்தினை

EVALUATION

Exercise 1. Choose the correct answer

1. GNP equals

a) NNP adjusted for inflation b) GDP adjusted for inflation c) GDP plus net property income from abroad d) NNP plus net property income or abroad

2. National Income is a measure of

a) Total value of money b) Total value of producer goods c) Total value of consumption goods d) Total value of goods and services

3. Primary sector consist of

a) Agriculture b) Automobiles c) Trade d) Banking

4. _____ approach is the value added by each intermediate good is summed to estimate the value of the final good.

a) Expenditure approach b) Value added approach c) income approach d) National Income

5. Gross value added at current prices for services sector is estimated at _____ lakh crore in 2018 to 19.

a) 91.06 b) 92.26 c) 80.07 d) 98.29

6. India is _____ larger producer in agricultural product.

a) 1st b) 3rd c) 4th d) 2nd

7. India's life expectancy at birth is _____ years.

a) 65 b) 60 c) 70 d) 55

8. Which one is a trade policy?

a) irrigation policy b) import and export policy c) land-reform policy d) wage policy Exercise 2. Fill in the blanks

1. is the primary sector in India.

2. GDP is the indicator of economy.

3. Secondary sector otherwise called as .

Exercise 3. Match the following

1. Electricityor Gas and Water
2. Price policy
3. GST
4. Per capita income
5. C plus I plus G plus (X minus M)

Options: National Income divided by Population, Gross Domestic Product, Industry Sector, Agriculture, Tax on goods and service

Exercise 4. Give short answer

1. Define National income.

2. What is meant by Gross domestic product?

3. Write the importance of Gross domestic product.

4. What is per capita income?

5. Define the valuetoadded approach with example.

6. Write the name of economic policies in India.

7. Write a short note
1) Gross National Happiness (GNH)
2) Human Development Index (HDI)

Exercise 5. Write in detail answer

1. Briefly explain various terms associated with measuring of national income.

2. What are the methods of calculating Gross Domestic Product? and explain its

3. Write any five differences between the growth and development.

4. Explain the following the economic policies
1.Agricultural Policy
2.Industrial policy
3.New economic policy

Exercise 6. Activity and Project

1. Students are collect the Gross Domestic Product datas of Tamilnadu and compare the other state of Karnataka and Kerala's GDP.

2. Students are collectthe details of Employment growth of Tamilnadu.

REFERENCE BOOKS

1. Sankaran Indian Economy (problems, policies,and development).
2. Ramesh singh Indian economy (10th Edition).
3. Ministry of statistics and implementation planning commission. Government of india.

INTERNET RESOURCES

1. http://en.wikipedia.org
2. http://www.statisticstimes.com

Book-back Exercises — Questions & Answers

Answers generated strictly from the Samacheer Kalvi textbook content. Attempt each question first, then click "Show Answer" to check.

1. Choose the correct answer

1. GNP equals

a) NNP adjusted for inflation b) GDP adjusted for inflation c) GDP plus net property income from abroad d) NNP plus net property income or abroad

Answer: c) GDP plus net property income from abroad

Explanation: 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.

2. National Income is a measure of

a) Total value of money b) Total value of producer goods c) Total value of consumption goods d) Total value of goods and services

Answer: d) Total value of goods and services

Explanation: National Income is a measure of the total money value of goods and services produced by an economy over a period of time, normally a year.

3. Primary sector consist of

a) Agriculture b) Automobiles c) Trade d) Banking

Answer: a) Agriculture

Explanation: Agricultural sector is known as primary sector, in which agricultural operations are undertaken. Agriculture based allied activities, production of raw materials are also undertaken.

4. _____ approach is the value added by each intermediate good is summed to estimate the value of the final good.

a) Expenditure approach b) Value added approach c) income approach d) National Income

Answer: b) Value added approach

Explanation: Value-Added Approach sums the value added by all the intermediate goods used in production to give the total value of the final goods produced in the economy.

5. Gross value added at current prices for services sector is estimated at _____ lakh crore in 2018 to 19.

a) 91.06 b) 92.26 c) 80.07 d) 98.29

Answer: b) 92.26

Explanation: Gross Value Added (GVA) at current prices for Services sector is estimated at 92.26 lakh crore in 2018 to 19.

6. India is _____ larger producer in agricultural product.

a) 1st b) 3rd c) 4th d) 2nd

Answer: d) 2nd

Explanation: India is 2nd largest producer of agricultural products. India accounts for 7.39 percent of total global agricultural output.

7. India's life expectancy at birth is _____ years.

a) 65 b) 60 c) 70 d) 55

Answer: a) 65

Explanation: Life expectancy at birth is 65 years according to the chapter text.

8. Which one is a trade policy?

a) irrigation policy b) import and export policy c) land-reform policy d) wage policy

Answer: b) import and export policy

Explanation: Import and export policy is related to trade, while other options are related to different sectors like agriculture and labor.

2. Fill in the blanks

1. _____ is the primary sector in India.

Answer: Agriculture

2. GDP is the indicator of _____ economy.

Answer: growing

3. Secondary sector otherwise called as _____.

Answer: Industrial Sector

3. Match the following

1. Match the Following

1. Electricity or Gas and Water	National Income divided by Population
2. Price policy	Gross Domestic Product
3. GST	Industry Sector
4. Per capita income	Agriculture
5. C plus I plus G plus (X minus M)	Tax on goods and service

Answers: 1-c, 2-d, 3-e, 4-a, 5-b

4. Give short answer

1. Define National income.

Answer: National Income is a measure of the total money value of goods and services produced by an economy over a period of time, normally a year. Commonly National Income is called as Gross National Product (GNP) or National Dividend.

2. What is meant by Gross domestic product?

Answer: The GDP is the market value of all the final goods and services produced in the country during a time period. GDP is equal to C plus I plus G plus (X minus M) where C is Consumption, I is Investment, G is Government Expenditure and (X minus M) is Exports minus Imports.

3. Write the importance of Gross domestic product.

Answer: The importance of GDP includes: 1. Study of Economic Growth 2. Problems of inflation and deflation 3. Comparison with developed countries of the world 4. Estimate the purchasing power 5. Study of Public Sector 6. Guide to economic planning.

4. What is per capita income?

Answer: 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 is equal to National Income divided by Population.

5. Define the value-added approach with example.

Answer: Value-Added Approach sums the value added by all the intermediate goods used in production to give the total value of the final goods produced in the economy. For example, in making tea: Tea powder plus Milk plus Sugar equals Tea. The value of intermediate goods equals the value of final goods.

6. Write the name of economic policies in India.

Answer: The important economic policies in India are: 1. Agricultural policy 2. Industrial Policy 3. New Economic Policy (LPG - Liberalisation, Privatisation and Globalisation). These policies have been framed by the Government of India since independence for increasing rate of economic growth and economic development.

7. Write a short note 1) Gross National Happiness (GNH) 2) Human Development Index (HDI)

Answer: 1) GNH: The term Gross National Happiness was coined in 1972 by the king of Bhutan, who said "Gross National Happiness is more important than Gross National Product." The four pillars are sustainable development, environmental conservation, culture preservation, and good governance. 2) HDI: Introduced in 1990 by Mahbub ul Haq, HDI is a composite index of life expectancy, adult literacy rate, and standard of living. India climbed to 130 out of 189 countries in the latest rankings.

5. Write in detail answer

1. Briefly explain various terms associated with measuring of national income.

Answer: The various terms associated with measuring national income are: 1. GNP - total value of goods and services produced by domestic residents including profits from abroad 2. GDP - total value of output produced within geographical boundaries 3. NNP - GNP minus depreciation 4. NDP - GDP minus depreciation 5. Per Capita Income - National Income divided by population 6. Personal Income - total money income received before direct taxes 7. Disposable Income - actual income after direct taxes that can be spent on consumption.

2. What are the methods of calculating Gross Domestic Product? and explain its

Answer: The three methods of calculating GDP are: 1. Expenditure Approach - GDP is measured by adding expenditure on all final goods and services (Y = C + I + G + (X-M)) 2. Income Approach - GDP is measured from earnings perspective (Y = wages + rent + interest + profit) 3. Value-Added Approach - The sum of value added by all intermediate goods gives total value of final goods produced. Each method provides the same result but from different perspectives of the economy.

3. Write any five differences between the growth and development.

Answer: Five differences between Economic Growth and Development: 1. Definition - Growth is quantitative change in output; Development considers rise in output with HDI advancement 2. Concept - Growth is narrower; Development is broader 3. Nature - Growth is quantitative; Development is qualitative 4. Scope - Growth measures GDP, GNP; Development measures life expectancy, literacy rate 5. Term - Growth is short-term; Development is long-term. Growth focuses on output increase while development focuses on overall living standards improvement.

4. Explain the following the economic policies 1.Agricultural Policy 2.Industrial policy 3.New economic policy

Answer: 1. Agricultural Policy - Set of government decisions relating to domestic agriculture and imports. Includes price policy, land reform, Green Revolution, irrigation policy, food policy, agricultural labour policy and cooperative policy for risk management and economic stability. 2. Industrial Policy - Important for creating employment, promoting R&D, modernization and making economy self-sufficient. Includes textile, sugar, price policies, small scale industrial policies since 1948. 3. New Economic Policy - Introduced in 1990s, known as LPG (Liberalisation, Privatisation, Globalisation). These reforms significantly influenced overall economic growth by opening borders to free trade and allowing foreign companies.

📝 Summary

1. GDP (Gross Domestic Product) is the market value of all final goods and services produced in a country during a specific time period, calculated as C + I + G + (X - M) where C is Consumption, I is Investment, G is Government Expenditure, and (X - M) is net exports.
2. Goods are tangible, physical items that can be touched and felt, while services are intangible activities that are crucial for economic production but cannot be physically touched.
3. Only final goods and services are included in GDP calculation to avoid "double counting" - intermediate goods used in production are excluded because their value is already included in the final product's price.
4. National Income measures the total money value of goods and services produced by an economy over a period of time (normally a year) and is commonly called Gross National Product (GNP) or National Dividend.
5. Gross National Product (GNP) represents the total value of goods and services produced and income received in a year by domestic residents of a country, including profits earned from capital invested abroad.