High School

1. Explain the difference between GNP and GDP.

2. Mention types of unemployment and give examples.

3. Identify macroeconomic goals of a country.

4. Explain the three main motives for holding money.

5. Explain the meaning of inflation and its causes.

Answer :

  1. Explain the difference between GNP and GDP.

    Gross National Product (GNP) and Gross Domestic Product (GDP) are both measures of economic activity, but they are calculated differently.

    • GDP (Gross Domestic Product): Measures the total value of all goods and services produced within a country's borders in a given time period, regardless of who produces them. It focuses on location.

    • GNP (Gross National Product): Measures the total value of all goods and services produced by the residents of a country, regardless of where they are produced. It includes income from overseas investments, focusing on ownership.

  2. Mention types of unemployment and give examples.

    • Frictional Unemployment: Occurs when people are between jobs or are entering the job market for the first time. Example: A recent college graduate looking for their first job.

    • Structural Unemployment: Happens when there is a mismatch between workers’ skills and the jobs available. Example: A factory worker losing their job due to automation.

    • Cyclical Unemployment: Related to the ups and downs of the economy. When the economy is doing poorly, there are fewer jobs. Example: A worker laid off during a recession.

    • Seasonal Unemployment: Occurs when people are unemployed at certain times of the year when demand for labor is lower. Example: A ski instructor being out of work during the summer.

  3. Identify macroeconomic goals of a country.

    • Economic Growth: Increasing the output of goods and services over time.

    • Full Employment: Achieving a low level of unemployment where all who want a job have one.

    • Price Stability: Controlling inflation to ensure that prices neither rise too quickly nor fall too much.

    • Balanced Trade: Maintaining a healthy level of imports and exports to avoid large deficits or surpluses.

    • Sustainable Development: Ensuring economic growth is sustainable in the long term without exhausting resources or harming the environment.

  4. Explain the three main motives for holding money.

    • Transactional Motive: People hold money for everyday transactions and immediate purchases.

    • Precautionary Motive: People keep some money aside for unexpected expenses or emergencies.

    • Speculative Motive: Holding money to take advantage of future investment opportunities.

  5. Explain the meaning of inflation and its causes.

    • Inflation: A general rise in prices across the economy over time, which reduces the purchasing power of money.

    • Causes of Inflation:

      • Demand-pull inflation: When demand for goods and services exceeds their supply, leading to price increases.
      • Cost-push inflation: When the cost of production rises (e.g., wages, raw materials), and producers pass these costs onto consumers in the form of higher prices.
      • Built-in inflation: When businesses and workers expect prices to rise, leading to increased wages and prices to maintain profit margins.