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Economic Indicators of Development
GDP, GNP, PPP, Energy Consumption
Author:
Syed Ali
Edu Level: Unit2
Date: Aug 12 2025 - 6:32 PM
⏱️Read Time: 2 min
Economic Indicators of Development
Gross Domestic Product (GDP)
Definition: The total market value of all goods and services produced within a country’s borders over a one-year period.
- Includes production by foreign-owned companies operating inside the country.
- Typically expressed in US dollars and on a per capita basis to allow easier international comparisons.
- Widely used by governments, economists, and policymakers to track economic growth and performance.
Gross National Product (GNP)
Definition: The total market value of goods and services produced by a country’s citizens or businesses in a given year, regardless of where the production takes place.
- Includes production by nationals abroad.
- Excludes production by foreign-owned companies operating domestically.
- GNP figures can differ significantly from GDP depending on the amount of foreign investment and overseas earnings.
Advantages of GDP & GNP
- Provide clear, quantitative data for economic performance.
- Enable easy comparisons and global rankings between countries.
- Straightforward to calculate and widely available.
Disadvantages of GDP & GNP
- Do not measure quality of life, social well-being, or income distribution.
- Exclude informal sector activities.
- Figures may be influenced or misrepresented for political or aid-related purposes.
- Do not reveal whether wealth creation is environmentally or socially sustainable.
Purchasing Power Parity (PPP)
- Definition: A currency conversion measure that compares how much a set amount of money can purchase in different countries.
- Helps compare cost of living and standards of living internationally.
- Adjusts for price differences between countries, giving a more realistic view of economic capacity.
Energy Consumption
- Definition: The total amount of energy used by a country within a given period.
- Higher energy use often reflects industrialization and greater technological development.
- Low per capita energy consumption is common in developing countries with less industrial activity.
- Increased mechanization in agriculture typically reduces agricultural employment while boosting productivity.
