Explain the following National Income concepts:
(a) Gross Domestic Product (GDP; (4 marks)
(b) Gross National Product (GNP; (4 marks)
(c) Cost of living; (4 marks)
(d) Per Capital income; (4 marks)
(e) Standard of living; (4 marks)
Explanation
(a) Gross Domestic Production (GDP): This is the total market value of final goods and services produced in a country at as particular period of time. In calculating the GDP of a country, no account is taken of the nationality of those that produce the goods and services. GDP is used in determining whether the country concerned is experiencing economic growth, decline or stagnation.
(b) Gross National Product (GNP): GNP is defined as the total market value of final goods and serv-ices produced in a country over a given period of time including the net income from abroad. Basically, GNP measures the values of final goods and services that the country's citizens produced regardless of their location.
(c) Cost of living: Cost of living is the general price level of goods and services that determine how much an average household needs to meet basic necessities of life. It is measured in terms of price index. If the price level increases, the cost of living increases and the standard of living falls and vice versa.
(d) Per capita income is the national income of a country divided by her total population. It gives the average income in a country and it serves as an economic indicator of the standard of living and development.
(e)Standard of living: The standard of living indicates the volume of available goods and services at the disposal of individuals and therefore shows the level of their welfare. It is measured by per capita income. There is an inverse relationship between standard of living and cost of living.