Answer :
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.
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.
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.
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.
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.
