Previous Year Question
The most appropriate measure of a country's economic growth is its
Gross Domestic Product
Net Domestic Product
Net National Product
Per Capita Product
Correct Answer: D
Detailed Solution
An increase in the total size of an economy's GDP, NDP or NNP shows that total output has increased, but it does not indicate how much output is available, on average, for each person in the population.
Therefore, to examine economic growth in relation to the size of the population, Per Capita Product is considered a more appropriate measure.
It can broadly be understood as—
Per Capita Product = Total real output of the country ÷ Total population
For example, if a country's total output increases by 6% while its population also increases by 4%, the actual improvement in output per person will be much smaller than the growth in total output.
Therefore, growth in GDP alone does not necessarily mean that the economic position of the average person has improved at the same rate.
GDP measures the total value of final goods and services produced within the domestic territory of a country.
NDP is obtained after deducting depreciation from GDP.
NNP represents net national output associated with the residents of the country.
However, Per Capita Product relates total output to the population and is therefore more useful for comparing average economic performance across periods or countries.