What determines the policies that are set relating to the economy of a given country? Countries are often concerned about the health, or problems within their own boarders, however, most also participate in international imports and exports. The economic performance of a country determines what policies are made both domestically and abroad and each government has its own approach when making economic policies. The measurement of economic performance of a country can be measured in a number of ways, including: Gross Domestic Product, Gross National Product, GNP per capita, and Purchasing Power Parity. The economic performance of a country can include policies that involve employment, inflation, and monetary policies, and income distribution.
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Gross Domestic Product (GDP)
All the goods and services produced by a country’s economy in a given year, excluding income citizens and groups earn outside the country
Gross National Product (GNP)
Like, GDP, but also includes income citizens earned outside the country
GNP per capita
Divides the GNP by the population of the country
Purchasing Power Parity (PPP)
A figure like the GNP, except that it takes into consideration what people can buy using their income in the local economy
Questions to Consider:
In what ways is economic performance measured?
How does economic performance measures correlate to policy-making?
Review Questions:
Click the question to reveal the answer.
A figure like GNP, except that it takes into consideration what people can buy using their income in the local economy is _________ ___________ _____________.
Purchasing Power Parity
Common Policy Issues: Social Welfare
Citizens’ social welfare needs include health, employment, family assistance, and education. States provide different levels of support in each area, and they display many different attitudes toward government responsibility for social welfare. Some measures of social welfare are literacy rates, distribution of income, life expectancy and education levels. Two commonly used measures of social welfare are: The Gini Index and the Human Development Index.
Gini Index
A low Gini coefficient indicates more equal income or wealth distribution, while a high Gini coefficient indicates unequal income or wealth distribution. “0” corresponds to perfect equality (everyone has the same income), and “1” corresponds to complete inequality (one person has all the income; everyone else has zero income).
| Country | Gini Index |
|---|---|
| Great Britain | .36 |
| Russia | .40 |
| Nigeria | .44 |
| Iran | .43 |
| Mexico | .46 |
| China | .47 |
Human Development Index
The Human Development Index is a composite measurement of well-being (used to be standard of living). Rankings are “very high human development,” “high very high human development,” “medium human development,” and “low human development.” The Human Development Index (HDI) is a comparative measure of life expectancy, literacy, education and standards of living for countries worldwide.
| Country | Rank | |
|---|---|---|
| Great Britain | 28 | Very High |
| Mexico | 57 | High |
| Russia | 66 | High |
| Iran | 88 | High |
| China | 101 | Medium |
| Nigeria | 156 | Low |
Question to Consider:
- What indicators tell us the poverty level of a country?
Review Questions
Click the question to reveal the answer.
A _______ Gini index corresponds to perfect equality.
zero
Two commonly used measurements of the social welfare of a country are ______ and ______.
Gini index, HDI, Human Development Index