In my opinion a country can experience economic growth without a rise in standard of living of the people. It is first important to know what GNP, economic growth and standard of living is. They are defined as follows:
1. GNP is the economic performance of a country; it is the total value of all the finished goods and services in a time span of one year by the country’s citizens.
2. Economic growth is the increase in the produce of goods and services per head of the population over a period of time. It is a comparison of previous years’ performance with the current years.
3. Standard of living refers to the degree of wealth and comfort that a person can enjoy with increased income, employment etc.
The above definitions clearly show that there is a relationship between GNP, economic growth and standard of living. The following will explain how economic growth can have on …show more content…
The GNP produce would definitely increase with the increased workforce but is that increase justified? No, it’s not. The increase is GNP may show an economic growth but that produce would be used to support the increased population rather than increasing the living standards. Although the total National income may greatly increase but the average per capita GNP will decline if population growth is extremely high.
2. INCRESE IN INTEREST RATES
Assuming that that GNP has increased but the government doesn’t want to increase the spending patterns of the people in the economy so that the inflation rate could be maintained. So the government increases the interest rates. Since the interest rates have increased, people will be more eager to save instead of spend it so that return on the savings can be increased. In this scenario the income is increasing, people have the power to purchase but instead they save it or invest it which further strengthens the economy. This doesn’t have an effect on the living standards of people.
3. DIMINISHING
1. GNP is the economic performance of a country; it is the total value of all the finished goods and services in a time span of one year by the country’s citizens.
2. Economic growth is the increase in the produce of goods and services per head of the population over a period of time. It is a comparison of previous years’ performance with the current years.
3. Standard of living refers to the degree of wealth and comfort that a person can enjoy with increased income, employment etc.
The above definitions clearly show that there is a relationship between GNP, economic growth and standard of living. The following will explain how economic growth can have on …show more content…
The GNP produce would definitely increase with the increased workforce but is that increase justified? No, it’s not. The increase is GNP may show an economic growth but that produce would be used to support the increased population rather than increasing the living standards. Although the total National income may greatly increase but the average per capita GNP will decline if population growth is extremely high.
2. INCRESE IN INTEREST RATES
Assuming that that GNP has increased but the government doesn’t want to increase the spending patterns of the people in the economy so that the inflation rate could be maintained. So the government increases the interest rates. Since the interest rates have increased, people will be more eager to save instead of spend it so that return on the savings can be increased. In this scenario the income is increasing, people have the power to purchase but instead they save it or invest it which further strengthens the economy. This doesn’t have an effect on the living standards of people.
3. DIMINISHING