IGCSE Development Studies: Specimen Questions with Answers 23 - 24 of 98

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Passage

GNP data of South Africa is as follows:

  • South Africa GNP for was $ 0.00 B, a 100 % decline from 2019.
  • South Africa GNP for 2019 was $ 353.53 B, a 6.38 % increase from 2018.
  • South Africa GNP for 2018 was $ 332.32 B, a 7.74 % increase from 2017.
  • South Africa GNP for 2017 was $ 308.44 B, a 0.34 % increase from 2016.

Question 23 (1 of 6 Based on Passage)

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What are the components of GNP?

Explanation

Gross national product is the oldest concept of national income. It represents money value of all final goods and services produced including of course, net factor income abroad. It includes the value of final goods only and ignores the value of the intermediate goods such as raw materials.

Components of GNP are:

  • Consumer goods: It includes consumer goods produced by the private sector.
  • Private investment (I) : It includes inventory goods, producer goods produced in the private sector and construction of residential buildings
  • Goods and services produced by the government (G) : It includes both producer goods and consumer goods produced by the government.
  • Net income from abroad (E) : It can be both positive and negative

Question 24 (2 of 6 Based on Passage)

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How can a country get out of its debt trap?

Explanation

Once a country defaults, it cannot repay its debt, the burden of interest increases, a country is unable to get cheaper loans to repay its debt and it gets into the vicious circle of debt.

Ways a country can get out of its debt trap are as follows:

  • A country can raise the amount of taxes or it can reduce its expenses.
  • A country can opt for printing money to pay for its debt.
  • Reforming the economic policies will play an important role in supporting countries coming out of its debt trap.
  • A reduction in the trade barriers can reduce can help the countries in increasing the access to its market from other countries leading to an increase in its revenue.
  • To have a mechanism to look closely into the debt problems to encourage strong policies and providing risk sharing

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