Q. Increase in absolute and per capita real GNP do not connote a higher level of economic development, if

• industrial output fails to keep pace with agricultural output.
• agricultural output fails to keep pace with industrial output.
• poverty and unemployment increase.
• imports grow faster than exports.

Answer: (c) poverty and unemployment increase.

Notes:

• Increasing poverty and unemployment reflect that the fruits of growth in Real GNP have not adequately spread to all. While economic growth is happening for the nation in general a section of people is left behind hence a higher level of economic development is not taking place in the country.
• Economic development includes not only economic growth but also various other economic changes that improve the quality of life or standard of living of people in a country.
  • If with economic growth, a country experiences various economic changes such as reduction in poverty and unemployment, reduction in income and wealth inequality, increase in literacy rate, improvement in health and hygiene, etc, that improve the quality of life then that is economic development.

Gross National Product (GNP)

• Gross national product (GNP) refers to the total value of all the goods and services produced by the residents and businesses of a country, irrespective of the location of production.
• GNP takes into account the investments made by the businesses and residents of the country, living both inside and outside the country. It also takes into account the value of the products produced by the industries of the domestic origin.
• GNP does not take into consideration the incomes earned by the foreign nationals in the country or any products produced by a foreign company in the manufacturing units in the country.
• GNP is the GDP of a country added to its income earned from abroad. 
  • While calculating GNP transboundary activities of an economy are also taken into account.
  • GNP = GDP + Income from abroad