EcoDev6eCH02 - Norton Media Library Chapter 2 Measuring...

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Unformatted text preview: Norton Media Library Chapter 2 Measuring Economic Growth and Development Dwight H. Perkins Steven Radelet David L. Lindauer Measuring Income GNP Gross National Product measures the value of all final goods and services. Includes value produced by all citizens including those living abroad GDP Gross Domestic Product measures the value of final goods and services produced within national borders. IS GNP/GDP a good measure of income? 1. Omissions Some services are not valued housework Some goods are not marketed self consumption on farms 1. GNP includes "bads" pollution, crime, congestion. 2. Conversion problems. PPP vs. Market Exchange rate Market exchange rate is determined by value of traded goods alone. In above example it would be exchange rate that equalizes the price of steel or $200 = Rs. 9000 or e = Rs. 9000/$200 = Rs. 45/ $1 PPP exchange rate is eppp = CPIIndia/CPIUS Calculating PPP income Suppose CPI basket contains 1 unit of steel and 1 unit of services in India and US USCPI = $200 + $5000 = $5200 IndianCPI = Rs. 9000 + Rs. 60,000 = Rs. 69,000 Eppp = Rs. 69000/$5200 or Rs13/$1 PPP GNP = Rs. 312 billion X Eppp = $24 b Human Development Index. Comprises of three factors Per capita income Health (measured by life expectancy at birth) Education (measured by adult literacy and school enrollment) http://hdr.undp.org/reports/global/2005/pdf/ HDR05_HDI.pdf Millenium development Goals W. W. Norton & Company Independent and Employee-Owned This concludes the Norton Media Library Slide Set for Chapter 2 Economics of Development SIXTH EDITION By Dwight H. Perkins Steven Radelet David L. Lindauer ...
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