IGCSE Development Studies: Specimen Questions with Answers 92 - 92 of 98

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Question 92


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Elaborate the term GNP.


There are several denominations/measurements to indicate the size of an economy, one of them is GNP. It is the largest denomination to measure the size of economic activity in an economy. It is defined as the “Aggregate of the market value of final goods and services produced by an economy over a period of one year”

GNP is referred to as the market value of goods and services. It implies that we will consider only that value of a product at which it is traded or transacted in a market. Goods are services are to be treated equally. We do not distinguish between tangible goods and intangible services. The market value of wheat is to be added to the market value of barber՚s services. It must be clear that only final goods and services are considered while calculating GNP and not all goods and services. The difference between intermediate goods and final goods is that intermediate goods are those goods that go into the process of production while final goods are purchased directly for consumption. GNP is usually calculated for a period of one year, may be calendar year or fiscal year.

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