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    Question

    Due to which of the following reasons increase in absolute and per capita real GNP do not connote a higher level of economic development?

    A Industrial output fails to keep pace with agricultural output Correct Answer Incorrect Answer
    B Agricultural output fails to keep pace with industrial output Correct Answer Incorrect Answer
    C Poverty and unemployment increases Correct Answer Incorrect Answer
    D Imports grow faster than exports Correct Answer Incorrect Answer

    Solution

    Per capita GNP is the total value of all the goods and services produced by a country in a year including income from foreign investments, divided by the number of people living there. For countries which have a lot of foreign investments, GNP per capita is a more accurate economic indicator. GNP = GDP + Net income inflow from abroad – Net income outflow to foreign countries. Therefore, if gains of increase in per capita income are grabbed by a small section of society (i.e. poverty and unemployment has increased and the increase in GNP is with a smaller section of population), then economic growth will not lead to economic development.

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