Measuring WealthMeasuring Wealth

Socials 9Socials 9

Measuring the Wealth of Countries: Measuring the Wealth of Countries: GNPGNP

Organizations such as the World Bank use Organizations such as the World Bank use an annual calculation called Gross National an annual calculation called Gross National Product (GNP) to measure a country’s Product (GNP) to measure a country’s wealthwealth

The GNP is the sum total of the country’s The GNP is the sum total of the country’s Gross Domestic Product (GDP), or income Gross Domestic Product (GDP), or income earned from all domestic goods and earned from all domestic goods and services, plus the net income earned on services, plus the net income earned on foreign investmentsforeign investments

GNP= GDP+ net income on foreign GNP= GDP+ net income on foreign investmentsinvestments

Measuring the Wealth of Countries: Measuring the Wealth of Countries: GNP continued..GNP continued..

Usually, the GNP for a country is divided by the country’s Usually, the GNP for a country is divided by the country’s total population to provide a figure called GNP per capita, or total population to provide a figure called GNP per capita, or for each personfor each person

GNP per capita= GNP/country’s total populationGNP per capita= GNP/country’s total population

Some economists use per capita GNP to measure a Some economists use per capita GNP to measure a country’s standard of living, or the average degree of country’s standard of living, or the average degree of material comfort that a country’s people enjoymaterial comfort that a country’s people enjoy

Per Capita GNP US$765 are LLDC’sPer Capita GNP US$765 are LLDC’s Per Capita GNP US$766-US$9385 are LDC’s Per Capita GNP US$766-US$9385 are LDC’s Per Capita GNP US$9386 are MDC’sPer Capita GNP US$9386 are MDC’s

Measuring the Health of Countries: Measuring the Health of Countries: The Human Development IndexThe Human Development Index

Some economists state that measuring a Some economists state that measuring a country’s standard of living by per Capita country’s standard of living by per Capita GNP solely is misleading GNP solely is misleading

This is because the method ignores This is because the method ignores pockets of terrible poverty that exist in pockets of terrible poverty that exist in some MDC’s and the pockets of wealth some MDC’s and the pockets of wealth that exist in many LDC’sthat exist in many LDC’s

Second, money should not be the only Second, money should not be the only criterion of a nation’s well being; social criterion of a nation’s well being; social factors such as education levels, life factors such as education levels, life expectancy, gender equality, and freedom expectancy, gender equality, and freedom from persecution applyfrom persecution apply

Measuring the Health of Countries: The Measuring the Health of Countries: The Human Development Index continued…Human Development Index continued…

There have been a number of attempts to devise a more There have been a number of attempts to devise a more complete system of measuring a country’s standard of complete system of measuring a country’s standard of livingliving

Today, the most common and authoritative measurement Today, the most common and authoritative measurement of living standards is the United Nations Human of living standards is the United Nations Human Development IndexDevelopment Index

Each year, the UN releases its Human Development Report, Each year, the UN releases its Human Development Report, which includes a list that ranks every country in the world which includes a list that ranks every country in the world according to three basic factors:according to three basic factors:

1) Longevity (life expectancy)1) Longevity (life expectancy) 2) Knowledge (literacy rates and educational attainment)2) Knowledge (literacy rates and educational attainment) 3) Income (GDP per capita)3) Income (GDP per capita)