Economic Growth and Development The government monitors economic growth to choose the direction of economic policy, analyze living standards, forecast development, and compare economic indicators with previous years or other countries. Economic development encompasses structural changes in the economy and improvement in living conditions.
Distinguishing Economic Development from Economic Growth Economic development is a broader concept than economic growth as it includes qualitative changes in the economy, modernization of the economic system to meet growing societal needs. It involves both developed and developing countries.
Gross National Product vs Gross Domestic Product GNP represents production within a country's borders by domestic firms at home or abroad while GDP only considers production by domestic firms within national borders. GNP includes added value from all stages of production including materials cost, labor payment, transportation costs etc., leading to an increase in product price through each stage until retail sale.
Added Value and Final Products 'Added value' refers to market value minus material costs for products purchased from suppliers; this can be seen when wool is sold by farmers then processed into fabric which increases its price before being sold as clothing at retail stores. 'Final products' are goods intended for end-use without further processing or resale; their calculation excludes intermediate sales used during final product manufacturing process.
Nominal vs Real Gross Domestic Product 'Nominal GDP' reflects current year monetary worth disregarding inflation whereas 'real GDP' adjusts nominal values based on inflation rates providing more accurate representation of actual purchasing power over time.