GSEB Solutions Class 12 Economics Chapter 2 Indicators of Growth and Development

GSEB Gujarat Board Textbook Economics Class 12 Economics Chapter 2 Indicators of Growth and Development Textbook Exercise Important Questions and Answers, Notes Pdf.

Gujarat Board Textbook Solutions Class 12 Economics Chapter 2 Indicators of Growth and Development

GSEB Class 12 Economics Indicators of Growth and Development Text Book Questions and Answers

1. Choose the correct option for the following questions :

Question 1.
Development is a multi dimensional process. Who has given this statement?
(a) Todaro
(b) Kindleberger
(c) Marshall
(d) Machlup
Answer:
(a) Todaro

Question 2.
Which concept is qualitative?
(a) National Income growth rate
(b) Per capita Income growth rate
(c) Economic growth
(d) Economic development
Answer:
(d) Economic development

Question 3.
What was India’s ranking in the world according to the Human Development Index in 2014?
(a) 127
(b) 128
(c) 129
(d) 130
Answer:
(d) 130

GSEB Solutions Class 12 Economics Chapter 2 Indicators of Growth and Development

Question 4.
What was the per capita income of India in US dollars according to the Human Development Report of 2014?
(a) 7110
(b) 7068
(c) 480
(d) 5497
Answer:
(d) 5497

Question 5.
When economic development takes place in a country
(a) Contribution of agricultural sector decreases.
(b) Contribution of agricultural sector increases.
(c) Contribution of industrial sector decreases.
(d) Contribution of service sector decreases.
Answer:
(a) Contribution of agricultural sector decreases.

Question 6.
What is the maximum value of Physical Quality of Life Index (PQLI)
(a) less than 100
(b) more than 100
(c) 100
(d) zero
Answer:
(c) 100

Question 7.
What is the value of Human Development Index?
(a) 0
(b) 1
(c) between 0 & 1
(d) 100
Answer:
(b) 1

GSEB Solutions Class 12 Economics Chapter 2 Indicators of Growth and Development

Question 8.
Generally which countries are related with the concept of economic growth?
(a) Developed
(b) Developing
(c) Backward countries
(d) Third world countries
Answer:
(b) Developing

Question 9.
Economic development is the ____ of economic growth.
(a) Cause
(b) Result
(c) Means
(d) End
Answer:
(b) Result

Question 9.
____ was first in Human Development Index according to 2014 report.
(a) Japan
(b) Norway
(c) America
(d) India
Answer:
(b) Norway

2. Answer the following questions in one line :

Question 1.
What is Economic growth?
Answer:
The increase in the total output of an economy in the long run is known as economic growth. By total output we mean that there is a continuous increase in the real national income and the real per capita income which we call as economic growth.

GSEB Solutions Class 12 Economics Chapter 2 Indicators of Growth and Development

Question 2.
Give the meaning of Economic development?
Answer:
Economic development is the process by which a nation improves the economic, political, and social well-being of its people.

Question 3.
What is per capita income?
Answer:
The number obtained by dividing total national income with total population is called per capita income.

Question 4.
Why is per capita as an indicator is more effective than national income as an indicator?
Answer:
The ‘per capita income’ takes into consideration the population which national income does not. Hence, this indicator of development is superior to the ‘national income’.

Question 5.
Which economist presented the Physical quality of life index?
Answer:
Morris Davis Morris.

Question 6.
How many countries were included in the HDI of 2014?
Answer:
188 countries

GSEB Solutions Class 12 Economics Chapter 2 Indicators of Growth and Development

Question 7.
Which factors are included in the Human Development Index?
Answer:

  1. Life expectancy,
  2. Education and
  3. Income.

Question 8.
What is Infant mortality rate?
Answer:
The number of infants who die out of every 1000 infants before completing their first year is known as infant mortality.

Question 9.
State the maximum value in Human Development Index.
Answer:
The maximum value of HDI is 1.

Question 10.
What does high per capita income indicate?
Answer:
It indicates that economic growth has taken place in the country. (When considering per capita income as an indicator we can also say that increase in per capita income indicates increase in development.)

GSEB Solutions Class 12 Economics Chapter 2 Indicators of Growth and Development

Question 11.
Sanitation facility indicates which aspect of improvement?
Answer:
It is a qualitative aspect.

3. Answer the following questions in brief :

Question 1.
State the limitations of National Income as an indicator.
Answer:
Considering growth rate in national income as an indicator of economic development has got its own limitations. These are discussed below:
1. Difficulty in calculating the true national income:
Problems of double counting, products produced for self-consumption, difficulties in calculating depreciation, illegal income, tax avoidance, tax evasion, barter transactions, illiteracy, employment of persons in more than one occupation, etc. make it difficult to estimate the true national income of the country. Hence national income cannot be considered as a true measuring rod of the rate of economic development of a country.

2. Population:

  • One cannot understand the rate of economic development just by knowing the national income of the country. The extent of population of the country should also be known.
  • By considering population we can say that if the rate of growth of national income is lesser than the rate of growth of population, then development is in negative. Similarly, if the rate of growth of national income is higher than the rate of growth, of population, then the rate of economic development is positive.
  • Since, the method of national income does not consider the population and its growth, this indicator of development is not the true indicator of economic development.

3. Different methods of calculating national income:
There are different methods used to calculate national income across the world. The most important among them are
(a) Production method,
(b) Income method and
(c) Expenditure method.

  • The measurement of national income varies based on the method of calculation used by the country.
  • Different countries adopt different methods to calculate national income. Hence, comparing the economic development through national income as an indicator becomes difficult.

GSEB Solutions Class 12 Economics Chapter 2 Indicators of Growth and Development

Question 2.
State the limitations of per capital income as an indicator.
Answer:
1. Only estimates:

  • The national income of the economy is calculated almost every year and hence we get quite a correct data but the population of the country is not calculated every year.
  • In India population census takes place once in 10 years. So, for the remaining 9 years we just take approximation of the population.
  • Per capita income is obtained by dividing gross national income with population. Since, we do not get exact count of population every year, per capita income gives us an estimated figure for all those years when we do not count population.

2. Difficulty in calculating national income and per capita income:
Whether per capita income should be calculated at current price or constant price and their related difficulties make it difficult to know the real situation of per capita income and hence development.

(3) Per capita income shows only an average:

  • We get per capita income simply by dividing national income with population. This means that per capita income shows only average income.
  • We cannot decide at which stage our development is just on the basis of this average.
  • If the income distribution among the population has taken place equitably then we can say that rise in per capita income shows development. However, if equitable distribution has not taken place then rise in per capita income does not mean increase in economic development. Hence, per capita income as an indicator of development is not truly appropriate.

4. Difficulty in comparison:

  • Countries express their per capita income in their own currency. This makes it difficult to compare at international level.
  • So, to compare per capita income of various countries, it will have to be first converted into US dollar. Once done, we can compare the economic development of different countries.
    Moreover, different countries of the world have put different controls on their exchange rates. Hence, real exchange rate cannot be known. So, it is not possible to make real comparison between countries.

5. Per capita income of the country is not actual income that a citizen gets. Per capita income as an indicator hides more than it reveals and hence it is not a correct indicator.

Question 3.
Where do the quantitative and qualitative changes occur?
Answer:

  • Quantitative and qualitative changes are characteristics of economic development.
  • -During economic development, ‘output’ which is a quantitative change increases.
  • Due to research and innovation, the quality of the products which is a qualitative aspect also improves.
  • However, it should be noted that there is more of qualitative improvement rather than quantitative.

GSEB Solutions Class 12 Economics Chapter 2 Indicators of Growth and Development

Question 4.
What type of change is rise in production?
Answer:

Question 5.
What are the various indicators of Economic development?
Answer:

  • Growth-rate of national income
  • Growth-rate of per capita income
  • Physical Quality of Life Index (PQLI)
  • HDI – Human Development Index
  • GDf – Gender Development Index
  • TAI – Technological Achievement Index
  • HPI – Human Poverty Index
  • HCI – Human Consumer Index

Question 6.
State the limitations of Economic growth.
Answer:
Limitations of the concept of economic growth:

  • Economic growth takes into consideration only the quantitative change.
  • In Economic growth, there is a rise in ‘national income’ and ‘per capita income’ only. Important aspects such as rise in institutional and psychological factors do not show any rise.
  • The concept of economic growth is narrow and reflects only the rise in the rate and extent of output.
  • The concept of economic growth is not of much use in understanding the welfare of the people.

GSEB Solutions Class 12 Economics Chapter 2 Indicators of Growth and Development

Question 7.
State the limitations of development.
Answer:
Limitations of the concept of economic development:
1. Economic development is a much broader concept than economic growth. It has the ability to reflect the progress of a nation. Even though in real sense, it cannot tell about the human development that is taking place. Whether human progress has taken place or not cannot be known from economic development.

2. The way we can measure economic growth we cannot measure economic development. The reason for this is that economic development includes changes that took place in the society. It is very difficult to measure what changes have taken place and the quantitative method to measure them.

3. When economic development takes place, the standard of living of people improves.
Now, although economic development is taking place in India today, there is not much improvement in the standard of living of the people. Hence, we cannot say that economic development means improvement in standard of living.

Question 8.
What is life expectancy at birth?
Answer:
Morris included three indicators or say determinants for measuring the physical quality of life.

These three determinants are:

  1. Literacy,
  2. Life expectancy and
  3. Infant mortality rate.

Thus, PQLI = Literacy level + Life expectancy index + Infant mortality index.

GSEB Solutions Class 12 Economics Chapter 2 Indicators of Growth and Development 1
After 2003, three more aspects were included in PQLI and the Quality of Life Index (QLI) was prepared in the world.

GSEB Solutions Class 12 Economics Chapter 2 Indicators of Growth and Development

Question 9.
Between growth and development, which one is difficult to measure? Why?
Answer:

  • Development is more difficult to measure compared to growth. Growth refers to quantitative change. It is always easy to measure quantitative aspects. Growth is measured by the means of statistical numbers and indicators such as per capita income, national income, etc.
  • Development is more of a qualitative aspect. It covers areas like how far the living standard of people has improved? How far is the health of people improved? It is quite difficult and lengthy process to measure such aspects.

4. Give answers to the point for the following questions :

Question 1.
What is Physical Quality of Life? What are the aspects included in it?
Answer:
Physical Quality of Life:

  • Physical quality of life in human beings depends on the different types of goods and services that a person consumes over a period of time.
  • The ‘standard of consumption’ refers to the consumption of goods and services by a person or group of people during a given period of time.

The consumption includes:

  1. Consumption of food, fuel and other non-durable goods
  2. Consumption of durable and semi durable goods
  3. Consumption of service goods/use of services
  • The standard of consumption or say the standard of living determines the physical quality of life.
  • If the living standard of the people goes up, it can be said that physical quality of life has gone up.
    Aspects included in the Physical Quality of Life:
  • The composition of goods and services consumed by an individual during a period of one year determines the physical quality of life.

Following are the determinants included in the list of goods and services:

  1. Food (Proportion of calories, protein and fats)
  2. Health and medical services (Proportion of doctor to population)
  3. Housing and clothing (Number of rooms in a house, average number of people living in each room, etc.)
  4. Education and entertainment (percentage of population getting primary secondary, education, entertainment facilities like TV, theatre, etc.)
  5. Transport, communication and information services (the extent of road, railway lines, number of telephones per capita.)
  6. Energy (Per capita energy consumption)
  7. Population having access to pure drinking water
  8. Average life expectancy
  9. Infant mortality rate
  10. Drainage facility

If there is an improvement in these 10 aspects or determinants then we can say that there is improvement in the physical quality of human life.

On the contrary, if improvement has not taken place then these determinants can be studied and it can be analyzed as to where improvement is needed and remedial measure to be adopted to increase the rate of development.

Every indicator can be relatively expressed. The value of each indicator is equally expressed on a scale of 0 to 100.

  • The indicator which has the highest value is given 100 points.
  • Note that developed countries give more importance to improve the physical quality of life.

GSEB Solutions Class 12 Economics Chapter 2 Indicators of Growth and Development

Question 2.
Discuss national income as an indicator of economic development.
Answer:
Growth-rate of national income:

  • National income as an indicator of development says that a country is said to have attained economic development if there is a continuous increase in the real national income of the country for a long period of time.
  • According to this indicator if the rate of rise in national income is high the development rate is said to be high and if the rate in rise of national income is slow, the rate of development is low.
    Moreover, if the national income does not rise it means that the country’s development is stagnant whereas if national income decreases, it indicates that there is underdevelopment or negative development.
  • For calculating this indicator ‘real income’ and not ‘money(nominal) income’ is taken into consideration. As a result, national income is calculated not at current prices but at constant prices.
    Tabular representation of national income as an indicator of development:
  • Some countries have a faster growth-rate of national income compared to other countries. Hence, we can also say that even the economic development in such countries will be faster.
  • Table given below shows that countries like Norway, America, Sri Lanka and Pakistan have slower annual growth rate of national income compared to India.
  • Although today India is considered to be one of the fastest developing countries of the world but, it should be noted that countries like Norway and America have already grown drastically in the past. Hence, their growth now appears smaller at 2 to 3% per annum compared to that of India which is 7.3%
Country Annual growth rate of national income (in %)
Norway 2.2
America 2.4
Sri Lanka 4.5
China 7.3
India 7.3
Pakistan 4.7

Question 3.
Explain per capita income as an indicator of economic development.
Answer:
Per capita income as an indicator of economic development:

  • The figure obtained by dividing gross national income of a country with the total population is called per capita income. In other words, per capita income is the average income per head.
  • As can be seen in the definition ‘per capita income’ takes into consideration the population also. Hence, this indicator of development is superior to the ‘national income’.
  • According to this indicator, when the per capita income of a country increases for a long period that too continuously, it can be said that economic development has taken place.
  • UNO (United Nations Organization) has recommended per capita income as an indicator of economic development.
  • If per capita income is high and if its rate of growth is also high then we can say that development has taken place.
  • If the county’s per capita income rises at a faster rate, development is said to be fast. If per capita income grows at a slow rate, development is slow. If per capita income is constant there is stagnation and if per capita income falls, development is negative.
  • The ultimate objective of economic development is to improve the standard of living of the people and to raise the human development. Per capita income is one of the best indicators in accomplishing this task.
  • When we say development has taken place we mean that standard of living of the people has improved. If this has not improved then we cannot say that development has taken place in real sense.
  • Now, rise in per capita income improves physical welfare of an individual and hence it is the real indicator of economic development.

Tabular representation of per capita income as an indicator of development:
Per-capita national income of few countries in 2014

Country Per capita national income of 2014 (In US $) [As per Purchasing Power Parity] Growth rate (in Percent)
Norway 64,992 1.1
America 52,947 1.6
Sri Lanka 9,779 3.5
China 12,547 6.7
India 5,497 6.0
Pakistan 4,866 2.6

Source: World Bank and Economic Survey, 2015-16

  • It can be seen from the table that the per capita income of India in 2014, on the basis of purchasing power parity is US $ 5,497 which is lower than Norway, America, China and Sri Lanka.
  • Compared to Norway, India’s per capita income is 11 to 12 times lesser and hence Norway’s growth is said to be higher than India’s by 11 to 12 times. But the rate of growth of per capita income is higher in India and hence our rate of development is faster compared to Norway and America.
  • Again we should not forget that although looking at the growth rate of per capita income the development of countries like Norway and America looks quite slower than India but these countries are highly developed with a very high per capita income.

GSEB Solutions Class 12 Economics Chapter 2 Indicators of Growth and Development

Question 4.
Explain in brief, the limitations of Physical Quality of Life Index.
Answer:
Limitations of PQLI:

  1. PQLI is calculated on the basis of only 3 indicators. On the basis of just three indicators it cannot be said whether the country has actually developed or not. To get a correct picture we need to include other factors also.
  2. PQLI gives only average. As per the equation of PQLI, the values obtained from three indicators are divided by 3 to obtain PQLI which is in the form of average.
    Average of three aspects of a country does not show the prominence or backwardness of each indicator. Hence, one cannot make decisions on the basis of averages.
  3. If a country’s present PQLI is high, it cannot be generalized that the economic development is high compared to other countries.
  4. It is not right to give equal weightage of 100 to all indicators because all three aspects do not have same importance in human life.
  5. Growth of income has high importance in physical quality of life index. PQLI does not consider this which is a major limitation.
  6. The PQLI of rich countries rise at a slower rate because average life cannot increase beyond a particular limit.

Question 5.
At present, India is growing or developing or both. Give answer by stating reasons.
Answer:

  1. Today India is considered as the fastest developing economies of the world. If we look at the growth data than India’s national income in 2014 has grown by 7.4%. This is much higher than even the most developed countries of Norway and America.
  2. Similarly, if we look at the per capita income, then India’s per capita income has grown by 6% in 2014. Percentage growth of India’s per capita income is very high compared to highly developed countries of Norway and America which lie at 1.1% and 1.6% per capita income growth rate.
  3. Looking at these figures one may surely say that India has done a lot of economic growth. But, by this we cannot say that India is a developed country.
  4. The Human Development Index of 2014 says that India’s HDI was 0.609 and it stood at 130th position out of the 180 countries. This is quite far than countries like Norway and America whose growth in national income and per capita income is quite less than India. In this regard we can say that though India has made good growth in its economy it lags far behind in the development.
  5. Although economic development is taking place in India today, there is not much improvement in the standard of living of the people.
  6. Hence, India is still a developing nation who has to travel long before earning the title of a developed nation.

GSEB Solutions Class 12 Economics Chapter 2 Indicators of Growth and Development

5. Answer the following questions in detail :

Question 1.
Explain with the help of examples, the difference between economic growth and economic development.
Answer:
The difference between economic growth and economic development can be understood from the following discussion.
Economic growth:

  • When we use the term ‘growth’ it means we are talking about ‘economic growth’.
  • The increase in the total output of an economy in the long run is known as economic growth.
  • By total output we mean that there is a continuous increase in the real national income and the real per capita income which we call as economic growth.
  • Such growth is possible due to the increase in supply of factors of production like, land, capital, labour and entrepreneurial ability of the people and increase in the productivity of these factors.
  • When the supply of factors of production, their availability, productivity and efficiency increase on a continuous basis it leads to rise in ‘real national income’ and ‘real per capitp income’. This rise is known as economic growth. Since, rise in income can be measured numerically and also seen we consider economic growth as a ‘quantitative change’.
  • One can gauge a country’s economic status by knowing its economic growth. Rate of economic growth also helps to compare the economies of two countries.

Economic development:

  • When there is continuous rise in total output by the means of real national income and real per capita income of the economy i.e. quantitative aspects along with rise in qualitative aspects it is called economic development.
  • Economic development is a much wider concept as compared to ‘economic growth’. It is a continuous and multidimensional process which includes economic growth, economic welfare and economic progress.
  • When we say that economic development is taking place it means that apart from monetary aspect the country is also showing progress in economic and social structure.
  • Thus, during economic development, along with economic progress, progress takes place in the society too.
  • Change is seen even in the structure of national income. The contribution of agriculture as percentage of the total national income decreases whereas the contribution of industry and service sector increases.
  • The disguised unemployed of agricultural sector get employed in other sectors.
  • The country starts using modern technology which saves time and money and hence increases productivity.
  • The country also innovate various new seeds for agriculture. This changes institutional structure which then changes the methods of production and distribution.
  • Slowly and gradually there is reduction in poverty, unemployment and inequalities.

Conclusion:

  • Economic growth is a very narrow concept and it mainly focuses on increasing the real national income and per capita income. On the other hand economic growth is a much wider concept which over and above the objectives of economic growth also aims at attaining social welfare of the people.
  • Economically weaker countries first aim at economic growth. Once they attain a level, they start aiming for economic development.

GSEB Solutions Class 12 Economics Chapter 2 Indicators of Growth and Development

Question 2.
Explain an improvement in the Physical Quality of Life Index as an indicator of economic development.
Answer:
Physical Quality Life Index (PQLI):

  • Increase in national income and per capita income has a number of limitations. Hence, these two are not the real indicators of economic development.
  • If the income of the country has increased but if the rise is seen only by a limited class of people then it cannot be termed as development.
  • The development of a country should be such that the living standards of the poor rise and the basic requirements of the citizens are fulfilled.
  • Keeping these things in mind Morris Davis Morris developed the Physical Quality of Life Index (PQLI).
  • PQLI attempts to measure the quality of life or well-being of a country. This index refers betterment of physical quality of life of human beings as economic development.
  • In order to derive the index of PQLI, the level of physical quality of life i.e. PQL is determined through various indicators.
  • If a country’s physical quality of life is higher than that of the other country, then that country is considered as more developed.
  • Morris included three indicators or say determinants for measuring the physical quality of life. These three determinants are
    1. Literacy,
    2. Life expectancy and
    3. Infant mortality rate.
  • Thus, PQLI = Literacy level + Life expectancy index + Infant mortality index.

GSEB Solutions Class 12 Economics Chapter 2 Indicators of Growth and Development 1
After 2003, three more aspects were included in PQLI and Quality of Life Index (QLI) was prepared in the world.

Question 3.
What are the factors included in the human development index? Explain them.
Answer:
Determinants of Human Development Index:

  • To keep things simple, HDI is prepared using three factors namely,
    (1) Life expectancy,
    (2) Education and
    (3) Income.
  • Life expectancy refers to the expected number of years a child will live at the time of birth, data on education depicts social achievements whereas income data depicts the standard of living.
  • Note that while calculating HDI instead of considering absolute values, average of all the three values is measured.

GSEB Solutions Class 12 Economics Chapter 2 Indicators of Growth and Development 2

GSEB Solutions Class 12 Economics Chapter 2 Indicators of Growth and Development

Question 4.
Compare PQLI and HDI and show which indicator is superior? Why?
Answer:

  1. PQLI was developed to overcome the various limitations of the previous scales.
  2. It was decided to develop an index which would consist of composite indicators to measure development in terms of meeting the basic needs of the majority of the population of a country or in terms of ‘quality of life’. This led to the development of a new index called Physical Quality of Life Index.
  3. Morris D. Morris developed a single composite index using three indicators life expectancy at age one, infant mortality and literacy.
  4. For each indicator, the performance of a country is rated on a scale of 1 to 100, where 1 represents the ‘worst’ performance and 100 the ‘best’ performance.
  5. Once a country’s performance in life expectancy, infant mortality and literacy has been rated on a scale of 1 to 100, the composite index of Physical
  6. Quality of Life Index (PQLI) for the country is calculated by averaging the three ratings, giving equal weightage to each.

Limitation of PQLI and development of HDI:
1. A major criticism of the PQLI, however, is that it fails to include many other , social and psychological characteristics suggested by the term ‘quality of life’.

2. The index has also been criticized on the grounds that it lacs a proper reasoning in giving equal weightage to all the three indicators and the possibility that measures such as life expectancy and infant mortality reflect practically the same phenomenon.

3. To overcome the limitations of PQLI and other indicators, the Human Development Index (HDI) was developed.

4. The UNDP has defined human development as “a process of enlarging people’s choices”. This depends not only on income but also on other social indicators. In contrast to this PQLI considered social indicators separately.

5. The three basic indicators are: longevity, knowledge, and a decent standard of living. Longevity is measured by life expectancy at birth; knowledge is measured by a combination of the adult literacy rate and standard of living is measured by GDP per capita (in purchasing power parity US$).

6. Before the HDI is computed, an index needs to be created for each dimension, the life expectancy index, education index and income index. Performance in each dimension is expressed as a value between 0 and 1.

7. The literacy index and gross enrolment index are given two-third and one-third weightage respectively to arrive at the education index. The HDI is calculated as a simple average of the three.

8. Countries are then classified into three categories:

  1. High human development (HDI 0.800 and above),
  2. Medium human development (HDI 0.799-0.500) and
  3. Low human development (HDI below 0.500).

9. The beauty of HDI is that once the increase in income passes the cut-off point, it is faced with diminishing returns and this makes it necessary to let the social indicators determine the HDI. Thus, the index is tuned to the growing concern among nations, regarding human development.

10. The HDI, unlike other indices which measure absolute levels, ranks countries in relation to each other. The index takes the progress made from the minimum towards the maximum.

11. The distance travelled is expressed in percentage terms. A clear picture emerges of the wide disparities that exist in the levels of human development between the developing and the developed countries.

12. The same exercise is repeated in respect to the other two components of the index. The distance travelled in each case is then used as the basis for combining the three devices, and this gives a common denominator to rank countries on a uniform scale.

Thus, looking to the overall manner in which HDI is computed and the indicators that it considers we can rightly say that HDI is better over PQU.

GSEB Solutions Class 12 Economics Chapter 2 Indicators of Growth and Development

Question 5.
Explain in short the indicators of economic development.
Answer:
Indicators of development:

  • A numerical value that shows the progress that acountry has made in areas such as health, education, gender equality, etc. Bvknown as an indicator of development.
  • These indicators work as measuring rod or standards to understand whether a country has made progress or not and if yes then how far.
  • These indicators which measure the rate of economic development and its extent can be presented in numerical and statistical terms.

Few of the indicators of development are discussed below:
1. National income:
National income as an indicator of development says that a country is said to have attained economic development if there is a continuous increase in the real national income of the country for a long period of time.

  • According to this indicator if the rate of rise in national income is high the development rate is said to be high and if the rate in rise of national income is slow, the rate of development is low.
  • Moreover, if the national income does not rise it means that the country’s development is stagnant whereas if national income decreases, it indicates that there is underdevelopment or negative development.
  • For calculating this indicator ‘real income’ and not ‘money (nominal) income’ is taken into consideration. As a result, national income is calculated not at current prices but at constant prices.

2. Per capita income:

  • The figure obtained by dividing gross national income of a country with the total population is called per capita income. In other words, per capita income is the average income per head.
  • As can be seen in the definition ‘per capita income’ takes into consideration the population also. Hence, this indicator of development is superior to the ‘national income’ as an indicator.
  • According to this indicator, when the per capita income of a country increases for a long period continuously, it can be said that economic development has taken place.
  • UNO (United Nations Organization) has recommended per capita income as an indicator of economic development.
  • If per capita income is high and if its rate of growth is also high then we can say that development has taken place.
  • If the county’s per capita income rises at a faster rate, development is said to fast. If per capita income grows at a slow rate, development is slow. If per capita income is constant there is stagnation and if per capita income falls, development is negative.
  • The ultimate objective of economic development is to improve the standard of living of the people and to raise the human development. Per capita income is one of the best indicators in accomplishing this task.
  • When we say development has taken place we mean that standard of living of the people has improved. If this has not improved then we cannot say that development has taken place in real sense.
  • Now, rise in per capita income improves physical welfare of an individual and hence it is the real indicator of economic development.

3. Physical Quality Life Index (PQLI):
1. Increase in national income and per capita income has a number of limitations. Hence, these two are not the real indicators of economic development.

2. If the income of the country has increased but if the rise is seen only by a limited class of people then it cannot be termed as development.

3. The development of a country should be such that the living standards of the poor rise and the basic requirements of the citizens are fulfilled.

4. Keeping these things in mind Morris Davis Morris developed the Physical Quality of Life Index (PQLI).

5. PQLI attempts to measure the quality of life or well-being of a country.

6. This index refers betterment of physical quality of life of human beings as economic development.

7. In order to derive the index of PQLI, the level of physical quality of life i.e. PQL is determined through various indicators.

8. If a country’s physical quality of life is higher than that of the other country, then that country is considered as more developed.

9. Morris included three indicators or say determinants for measuring the physical quality of life. These three determinants are

  1. Literacy,
  2. Life expectancy and
  3. Infant mortality rate.

Thus, PQLI = Literacy level + Life expectancy index + Infant mortality index.

4. Human Develooment Index:

  • The most recent indicator of development is the Human Development Index.
  • When United Nations Development Programme (UNDP) presented the Human Development Report (HDR) in 1990 it also introduced Human Development Index as a measure of development.
  • HDI emphasizes on both economic as well as non-economic measures.
  • Indian economists have also made a major contribution in preparing HDI.
  • The index is prepared by calculating the efforts made by each country for country’s development.
  • Improvements were introduced in the year 2010 in the minimum and maximum values of HDI. Since then the new values were used to measure HDI.

Determinants of Human Development Index:

  • To keep things simple, HDI is prepared using three factors namely,
    1. Life expectancy,
    2. Education and
    3. Income.
  • Life expectancy refers to the expected number of years a child will live at the time of birth, data on education depicts social achievements whereas income data depicts the standard of living.
  • Note that while calculating HDI instead of considering absolute values, average of all the three values is measured.

GSEB Class 12 Economics Indicators of Growth and Development Additional Important Questions and Answers

Short Answer Type Questions

Question 1.
What happens when the supply of factors of production, their availability, productivity and efficiency increase on a continuous basis?
Answer:
It leads to rise in ‘real national income’ and ‘real per capita income’ i.e. it leads to economic growth.

GSEB Solutions Class 12 Economics Chapter 2 Indicators of Growth and Development

Question 2.
State the definition of Prof. Hansen for economic growth.
Answer:
“Economic Growth refers to growth rate of national income or rise in total quantum of goods and services”.

Question 3.
State the definition of Simon Kuznets for economic growth.
Answer:
“A long term increase in capacity of a country to supply diverse economic goods to its people is known as economic growth”.

Question 4.
State the two limitations of economic growth.
Answer:

  1. Economic growth takes into consideration only the quantitative change.
  2. The concept of economic growth is narrow and reflects only the rise in the rate and extent of output.

Question 5.
State few changes that take place during economic development.
Answer:
The country shows progress in economic and social structure, changes occur in the structure of national income, the contribution of agriculture as percentage of the total national income decreases whereas the contribution of industry and service sector increases, etc.

Question 6.
State the definition of development as given by Michael Todaro.
Answer:
“Economic Development is a multidimensional process”.

Question 7.
State the definition of development as given by G.ivi. Meie
Answer:
“Economic Development is such a process in which there is no increase in the population living below the poverty line, the Distribution of income does not further increase the inequalities and there is a continuous rise in the real per capita income of the country for a long period of time”.

GSEB Solutions Class 12 Economics Chapter 2 Indicators of Growth and Development

Question 8.
State the definition of development as given by Machlup.
Answer:
Economic Development is process which increases the factors of production and creates change in the technique of production due to which per capita income continuously increases and the standard of living continuously rises irrespective whether population remains constant or increases.

Question 9.
Why economic development is a continuous process?
Answer:
It is easy for any country to start development but, difficult to maintain it. It needs to continuously review the development it gchšved and keep on putting effort to maintain the standard of living. Hence,……..

Question 10.
How can we say that demand changes during economic development?
Answer:
Development tends to increase the income of the people. This changes their tastes an preferences. As a result, their demand changes.

Question 11.
How doos development leads to more capital formation?
Answer:
Development leads to increase in demand for different commodities. This gives rise to new enterprises who produce such commodities. As a result, the rate of investment and capital formation increases manifolds in the country.

GSEB Solutions Class 12 Economics Chapter 2 Indicators of Growth and Development

Question 12.
‘The way we can measure economic growth we cannot measure economic development. Why is it said so?
Answer:
Economic development includes changes that took place in the society. It is very difficult to measure what changes have taken place and the quantitative method to measure them. Hence, it is said …

Question 13.
State two points of difference between economic growth and development
Answer:

  1. Economic growth is an occurrence while development is a process,
  2. Only quantitative changes take place in economic growth whereas both quantitative and qualitative changes take place in economic development.

Question 14.
What do you mean by ‘indicator of development’?
Answer:
A numerical value that ‘0hows the progress that a country has made in areas such as health, education, gender equality, etc. is known as an indicator of development.

Question 15.
Name few indicators of development.
Answer:

  1. Growth-rate of national income,
  2. Growth rate of per capita income.
  3. Physical quality of Life Index (PQLI) and
  4. Human Development Index (HDD

GSEB Solutions Class 12 Economics Chapter 2 Indicators of Growth and Development

Question 16.
Which income is considered to calculate national income?
Answer:
[For calculating national incor ìe’real income is taken into consideration.]

Question 17.
Why America is more developed than India even when India’s growth rate is much faster than America?
Answer:
Although India’s growth rate is quite last as compared to America, it should be noted that America has already grow’ drastically in the past. Hence …

Question 18.
State the problems experienced in calculating true national income
Answer:
Problems of double counting, products produced for self-consumption, difficulties in calculating depreciation, illegal income, tax avoidance, tax evasion, barter transactions, illiteracy, employment of occupation, etc. are few of the problems experienced

Question 19.
What is the problem faced by economists when countries calculate national income with different methods?
Answer:
Different methods reveal different results. Hence, it becomes difficult for economists to compare the growth in national income among different countries.

GSEB Solutions Class 12 Economics Chapter 2 Indicators of Growth and Development

Question 20.
State the limitation of per capita income In the context of estimation it makes.
Answer:
The national income is calculated almost every year and hence we get quite a correct data but the population of the country is not calculated every year. In India population census takes place once in 10 years. So, for the remaining 9 years we just take approximation of the population. This is a major limitation.

Question 21.
What is the problem related to ‘average’ in case of per capita income?
Answer:
We get per capita income simply by dividing national income with population. This means that per capita income shows only average income. This does not mean that every individual is earning the said per capita income.

Question 22.
Why per capita as an indicator is more effective than national income as an indicator?
Answer:
The ‘per capita income’ takes into consideration the population which national income does not. Hence, this indicator of development is superior to the ‘national income’.

GSEB Solutions Class 12 Economics Chapter 2 Indicators of Growth and Development

Question 23.
Name four aspect of physical quality of life.
Answer:

  1. Food (Calories, protein fats) Proportion,
  2. Health and Medical services (Proportion of doctor to population)
  3. Housing and clothing (Number of rooms in a house, average number of people lMng in each room) and
  4. Average life expectancy.]

Question 24.
When can one say that the physical quality of life has improved?
Answer:
[When the 10 aspects or determinants of physical quality of life improve we can say that there is improvement in the physical quality of human life.

Question 25.
What is life expectancy?
Answer:
[Number of years a child is expected to live at the time of birth of a child Is known as life expectancy. It shows the average life of the child born.

Question 26.
State the formula for PQLI.
Answer:
Physical Quality of Life Index = \(\frac{\text { Literacy rate + Infant mortality rate index }+\text { Life expectancy index }}{3}\)

Question 27.
AIl the three indicators of PQLI are measured between 0 and 100. What is the problem with this?
Answer:
It is not right to give equal weightage of 100 to all indicators of POLI because all three aspects do not have same importance in human life.

GSEB Solutions Class 12 Economics Chapter 2 Indicators of Growth and Development

Question 28.
Which is the latest indicator of development? Who introduced it? When?
Answer:
Human Development Index (HDI); When United Nations Development Programme (UNDP) presented the Human Development Report (HDR) in 1990 at that time it introduced Human Development Index as a measure of development.

Question 29.
Give an introduction of HDR-201 5.
Answer:
The Human Development Report (HDR) of 2014 was published in 2015. The report gave HDI for 188 countries. It classd these countries into four parts on the basis of human development.

Question 30.
Give an idea about the first part of the HDR-2015.
Answer:
The countries having ‘maximum development’ were included in first part. The average value of HDI of 1 St to 49th ranking countries falling in this part was 0.890.

Question 31.
Give an idea about the second part of HDR-201 5.
Answer:
The countries having ‘high development’ were included in second part. The average value of HDI of to 105th ranking countries was 0.735.

GSEB Solutions Class 12 Economics Chapter 2 Indicators of Growth and Development

Question 32.
Give an idea about the third part of HDR-2015.
Answer:
The countries having ‘moderate development’ were included in third part. The average value of HDI of 106th to 143rd ranking countries was 0.614.

Question 33.
Give an idea about the fourth part of HDR-2015.
Answer:
The countries having ‘low development’ were included in fourth part. The average value of HDI of 44’to 188th ranking countries is 0.493.

Question 34.
State two advantages of HDI.
Answer:

  1. HDI includes economic factors as well as social welfare by giving importance to education and health. This makes HDI the best and complete in its own so far,
  2. By studying the HDI, developing countries get an idea as to where there is scope for development and in which directioi should the government work.

Question 35.
State two limitations of HDI.
Answer:

  1. HDI includes only three social indicators. It should also include other social indk.aors,
  2. All three indicators are given equal weightage. But in reahty, with respect to time and situation different indicators may have different importance.

Long Answer Type Questions

Question 1.
The most important objective of the various countries of the world after the 2nd World War has been the attainment of economic development. Explain. OR The nucleus of all economic thinking especially after the 2nd World War has been the attainment of economic development. Explain. When did the countries realize the need of economic growth and development as the only source of survival?
Answer:

  • The terms ‘economic growth and ‘economic development’ have become popular after the 2nd World War i.e. after 1944.
  • The economy of the most of the countries got ruined after the Second World War. There was no alternative to growth and development for countries’ survival of the countries.
  • The developing countries like India started making efforts to solve problems like unemployment, poverty, hunger deaths, inequalities of income and wealth distribution, etc.
  • The developing countries started making attempts to reduce the gap in per capita income level of developing and developed countries.
  • Developing countries became more aware for attaining development and increasing the standard of living of their people.
  • It should be well remembered that the need for economic development then and even today exists for both developing and developed countries but, for different reasons. Developing countries aim at improving the standard of living of the people by reducing poverty and unemployment while the developed countries aim at maintaining the prevailing higher standard of living.

GSEB Solutions Class 12 Economics Chapter 2 Indicators of Growth and Development

Question 2.
What do you mean by economic growth? Explain.
Answer:

  • When we use the term ‘growth’ it means we are talking about ‘economic growth’.
  • The increase in the total output of an econom, n the long run is known as economic growth.
  • By total output mean that there is a continuous increase in the real national income and th&real per capita income which we call as economic growth.
  • Such growth is possible due to the increase in supply of factors of production like, land, capital, labour and entrepreneurial ability of the people and increase in the productivity of these factors.
  • When the supply of factors of production, their availability, productivity and efficiency increase on a continuous basis it leads to rise n ‘real national income’ and ‘real per capita income’. This rise is known as economic growth. Since, rise in income can be measured numerically and also seen we consider economic growth as a ‘quantitative change’.
  • One can gauge a country’s economic status by knowing its economic growth. Rate of economic growth also helps to compare the economies of two countries.

Question 3.
State the various definitions of economic growth as given by economists.
Answer:
Definition of Prof. Hansen:
“Economic Growth refers to growth rate of national income or rise in total quantum of goods and services”.

Definition of Simon Kuznets:
“A long term increase in capacity of a country to supply diverse economic goods to its people is known as economic growth”.

Question 4.
Explain briefly economic development.
Answer:
1. When there is continuous rise in total output by the means of real national income and real per capita income of the economy i.e. quantitative aspects along with rise in qualitative aspects it is called economic development.

2. Economic development is a much wider concept as compared to ‘economic growth’. It is a continuous and multidimensional process which includes economic growth, economic welfare and economic progress.
Changes experienced in a country under economic development:

3. When we say that economic development is taking place it means that apart from monetary aspect the country is also showing progress in economic and social structure.

Thus, during economic development, along with economic progress, progress takes place in the society too.

4. Change is seen even in the structure of national income. The contribution of agriculture as percentage of the total national income decreases whereas the contribution of industry and service sector increases.
The disguised unemployed of agricultural sector get employed in other sectors.

5. The country starts using modern technology which saves time and money and hence productivity increases.
The country also innovate various new seeds for agriculture. This changes institutional structure which then changes the methods of production and distribution.

6. Slowly and gradually there is reduction in poverty, unemployment and inequalities.

GSEB Solutions Class 12 Economics Chapter 2 Indicators of Growth and Development

Question 5.
State the definitions of economic development as given by various economists.
Answer:

  1. Definition of Michael Todaro: “Economic development is a multidimensional process”.
  2. Definition of G.M. Meier: “Economic development is such a process in which there is no increase in the population living below the poverty line, the distribution of income does not further increase the inequalities and there is a continuous rise in the real per capita income of the country for a long period of time”.
  3. Definition of Machlup: “Economic development is process which increases the factors of production and creates change in the technique of production due to which per capita income continuously increases and the standard of living continuously rises irrespective of whether population remains constants or increase”.

Question 6.
What kind of changes does a country under economic development experiences?
Answer:

  1. Definition of Michael Todaro: “Economic development is a multidimensional process”.
  2. Definition of G.M. Meier: “Economic development is such a process in which there is no increase in the population living below the poverty line, the distribution of income does not further increase the inequalities and there is a continuous rise in the real per capita income of the country for a long period of time”.
  3. Definition of Machlup: “Economic development is a process which increases the factors of production and creates change in the technique of production due to which per capita income continuously increases and the standard of living continuously rises irrespective of whether population remains constants or increase”.

Question 7.
State and explain the characteristics of economic development.
Answer:
Characteristics of economic development:
1. Economic development is a continuous process:

  • Economic development is a slow but strong process in a predetermined order and direction.
  • It is easy for any country to start development but, difficult to maintain it.
  • In the initial period one can see a quick rise in development but once a country reaches a specific level of development it then shows slower development.

2. Quantitative and qualitative change takes place:
In economic development, output which is a quantitative change increases. Due to research and innovation, the quality of the products which is a qualitative aspect also improves. But, it should be noted that there is more of qualitative improvement rather than quantitative.

3. Demand changes:

  • Development tends to increase the income of the people. This changes their tastes and preferences.
  • For example, in the initial stages of development, people demand more of basic or primary goods but, later they start demanding goods of comfort and luxury.

4. Labour become more dynamic:
Development leads to increase in education of labour which makes it more dynamic.

5. Increases capital formation:

  • Development leads to increase in demand for different commodities.
  • This gives rise to new enterprises who produce such commodities. As a result, the rate of investment and capital formation increases manifolds in the country.

6. Change in technology:
There is a shift in dependence from fire and water based i.e. traditional technology to coal and iron based i.e. modern technology. This results in faster development.

7. Self-motivated development:
After a particular stage, development becomes habit of people and hence it is self-motivating.

GSEB Solutions Class 12 Economics Chapter 2 Indicators of Growth and Development

Question 8.
Differentiate between economic growth and economic development.
Answer:

Economic growth Economic development
1. Economic growth is an occurrence 1. Economic development is a process
2. In economic growth quantitative change occurs. 2. In economic development both quantitative and qualitative change takes place.
3. It emphasizes on the distribution of available resources. 3. It emphasizes on utilizing the unutilized resources.
4. Economic growth is related to developed countries. 4. The concept of economic development is related to developing countries.
5. It is easy to measure economic growth. 5. it is quite difficult to measure economic development.
6. The concept of growth is narrow. 6. The concept of development is broad.
7. Economic growth is only related to increase in per capital income. 7. Economic development is related to distribution along with per capita income.
8. Economic growth is a fast process. 8. Economic development is a slow process.
9. Economic growth is possible without economic development. 9. Economic development is not possible without economic growth.

Question 9.
What do you mean by indicators of development? Explain.
Answer:
Indicators of development:

  • A numerical value that shows the progress that a country has made in areas such as health, education, gender equality, etc. is known as an indicator of development.
  • These indicators work as measuring rod or standards to understand whether a country has made progress or not and if yes then how far.
  • These indicators which measure the rate of economic development and its extent can be presented in numerical and statistical terms.
  • Moreover, these indicators also help to compare the development of two or more countries.
  • The way thermometer measures the changes in the temperature of human body and records it, development indicators measure and records development of the country.

Some of the indicators of economic development are:

  1. Growth-rate of national income
  2. Growth-rate of per capita income
  3. Physical Quality of Life Index (PQLI)
  4. Human Development Index (HDI)

GSEB Solutions Class 12 Economics Chapter 2 Indicators of Growth and Development

Question 10.
What problems does a country face while calculating the true national income?
Answer:
Difficulty in calculating the true national income:
Problems of double counting, products produced for self-consumption, difficulties in calculating depreciation, illegal income, tax avoidance, tax evasion, barter transactions, illiteracy, employment of persons in more than one occupation, etc. make it difficult to estimate the true national income of the country. Hence national income cannot be considered as a true measuring rod of the rate of economic development of a country.

Question 11.
National income is not a true indicator of economic development because it ignores population. Explain.
Answer:
Population:

  • One cannot understand the rate of economic development just by knowing the national income of the country. The extent of population of the country should also be known.
  • By considering population we can say that if the rate of growth of national income is lesser than the rate of growth of population, then development is in negative. Similarly, if the rate of growth of national income is higher than the rate of growth, of population, then the rate of economic development is positive.
  • Since, the method of national income does not consider the population and its growth, this indicator of development is not the true indicator of economic development.

Question 12.
What is the problem with calculating national income with various methods?
Answer:
Different methods of calculating national income:
There are different methods used to calculate national income across the world. The most important among them are:
(a) Production method,
(b) Income method and
(c) Expenditure method.

  • The measurement of national income varies based on the method of calculation used by the country.
  • Different countries adopt different methods to calculate national income. Hence, comparing the economic development through national income as an indicator becomes difficult.

GSEB Solutions Class 12 Economics Chapter 2 Indicators of Growth and Development

Question 13.
Population is not counted every year but per capita income is Explain the problem with this.
Answer:
Only estimates:

  • The national income of the economy is calculated almost every year and hence we get quite a correct data but the population of the country is not calculated every year.
  • In India population census takes place once in 10 years. So, for the remaining 9 years we just take approximation of the population.
  • Per capita income is obtained by dividing gross national income with population. Since, we do not get exact count of population every year, per capita income gives us an estimated figure for all those years when we do not count population.

Question 14.
Lack of equitable distribution of per capita income makes it an incomplete indicator of development. Explain. OR Per capita income is only an average. Explain.
Answer:
Per capita income shows only an average:

  • We get per capita income simply by dividing national income with population. This means that per capita income shows only average income.
  • We cannot decide at which stage our development is just on the basis of this average.
  • If the income distribution among the population has taken place equitably then we can say that rise in per capita income shows development. However, if equitable distribution has not taken place then rise in per capita income does not mean increase in economic development. Hence, per capita income as an indicator of development is not truly appropriate.

Question 15.
Why does it become a pain in the neck to compare per capita income of different countries?
Answer:
Difficulty in comparison:
1. Countries express their per capita income in their own currency. This makes it difficult to compare at international level.

2. So, to compare per capita income of various countries, it will have to be first converted into US dollar. Once done, we can compare the economic development of different countries.

3. Moreover, different countries of the world have put different controls on their exchange rates. Hence, real exchange rate cannot be known. So, it is not possible to make real comparison between countries.

GSEB Solutions Class 12 Economics Chapter 2 Indicators of Growth and Development

Question 16.
State the determinants included in the list of goods and services for physical quality of life.
Answer:
Physical Quality of Life:
1. Physical quality of life in human beings depends on the different types of goods and services that a person consumes over a period of time.

2. The ‘standard of consumption’ refers to the consumption of goods and services by a person or group of people during a given period of time.

The consumption includes:

  • Consumption of food, fuel and other non-durable goods
  • Consumption of durable and semi durable goods
  • Consumption of service goods/use of services

3. The standard of consumption or say the standard of living determines the physical quality of life.

4. If the living standard of the people goes up, it can be said that physical quality of life has gone up.
Aspects included in the Physical Quality of Life:

5. The composition of goods and services consumed by an individual during a period of one year determines the physical quality of life.

Following are the determinants included in the list of goods and services:

  1. Food (Proportion of calories, protein and fats)
  2. Health and medical services (Proportion of doctor to population)
  3. Housing and clothing (Number of rooms in a house, average number of people living in each room, etc.)
  4. Education and entertainment (percentage of population getting primary secondary, education, entertainment facilities like TV, theatre, etc.)
  5. Transport, communication and information services (the extent of road, railway lines, number of telephones per capita.)
  6. Energy (Per capita energy consumption)
  7. Population having access to pure drinking water
  8. Average life expectancy
  9. Infant mortality rate
  10. Drainage facility

If there is an improvement in these 10 aspects or determinants then we can say that there is improvement in the physical quality of human life.

  • On the contrary, if improvement has not taken place then these determinants can be studied and it can be analyzed as to where improvement is needed and remedial measure to be adopted to increase the rate of development.
  • Every indicator can be relatively expressed. The value of each indicator is equally expressed on a scale of 0 to 100.
  • The indicator which has the highest value is given 100 points.
  • Note that developed countries give more importance to improve the physical quality of life.

GSEB Solutions Class 12 Economics Chapter 2 Indicators of Growth and Development

Question 17.
What do you mean by literacy level?
Answer:
Morris included three indicators or say determinants for measuring the physical quality of life. These three determinants are:

  1. Literacy,
  2. Life expectancy and
  3. Infant mortality rate.

Thus, PQLI = Literacy level + Life expectancy index + Infant mortality index.

GSEB Solutions Class 12 Economics Chapter 2 Indicators of Growth and Development 1
After 2003, three more aspects were included in PQLI and Quality of Life Index (QLI) was prepared in the world.

GSEB Solutions Class 12 Economics Chapter 2 Indicators of Growth and Development

Question 18.
What is infant mortality rate?
Answer:
Physical Quality Life Index (PQLI):
1. Increase in national income and per capita income has a number of limitations. Hence, these two are not the real indicators of economic development.

2. If the income of the country has increased but if the rise is seen only by a limited class of people then it cannot be termed as development.

3. The development of a country should be such that the living standards of the poor rise and the basic requirements of the citizens are fulfilled.

4. Keeping these things in mind Morris Davis Morris developed the Physical Quality of Life Index (PQLI).

5. PQLI attempts to measure the quality of life or well-being of a country. This index refers betterment of physical quality of life of human beings as economic development.

6. In order to derive the index of PQLI, the level of physical quality of life i.e. PQL is determined through various indicators.

7. If a country’s physical quality of life is higher than that of the other country, then that country is considered as more developed.

8. Morris included three indicators or say determinants for measuring the physical quality of life. These three determinants are:

  1. Literacy,
  2. Life expectancy and
  3. Infant mortality rate.

Thus, PQLI = Literacy level + Life expectancy index + Infant mortality index.

GSEB Solutions Class 12 Economics Chapter 2 Indicators of Growth and Development 1
After 2003, three more aspects were included in PQLI and Quality of Life Index (QLI) was prepared in the world.

Question 19.
Why did Morris select only three determinants in the index for physical quality of life?
Answer:
Reasons for only three determinants in the Physical Quality of Life Index (PQLI):
Morris had included only three determinants namely literacy level, life expectancy and infant mortality for calculating PQLI. The reason for this is as follows.

  1. We can get reliable data of all these three determinants for all the countries.
  2. All these factors (determinants) tells about the the results and not just the efforts.
  3. All these three factors are object oriented and hence can fulfill the justifiable standards for performance comparison.

Question 20.
State the importance of the three determinants in PQLI.
Answer:
Importance of determinants of PQLI:
(a) Literacy:

  • Literacy is a very important measuring rod for measuring physical quality of life.
  • Increase in literacy and education shows rise in the welfare of an individual. Educated and skilled humans are a necessary aspect for a national development.

(b) Life expectancy:

  • Increase in life expectancy is the reflection of improvement in social condition and wellbeing.
  • Increase in life expectancy is a result of proper nutrition, medical care and better environment.

(c) Infant mortality rate:

  • It is the reflection of social status and welfare.
  • It reflects availability of pure drinking water, environment of the house, status of women and mother’s role.

GSEB Solutions Class 12 Economics Chapter 2 Indicators of Growth and Development

Question 21.
Explain briefly the method to calculate PQLI.
Answer:
Formulation of physical Quality of Life Index (PQLI):

  • Three indicators namely, literacy, life expectancy and infant mortality rate together form the index for physical quality of life.
  • Each indicator is measured on the scale of 1 to 100 where 1 represents the worst performance by any country and 100 is the best performance.

Steps to calculate Physical Quality of Life Index:

  1. Find percentage of the population that is literate (literacy rate)
  2. Find the infant mortality rate
  3. Find the life expectancy
  4. Physical Quality of Life Index = \(=\frac{\text { Literacy rate }+\text { Infant mortality rate index }+\text { Life expectancy index })}{3}\)

Question 22.
State the important aspects of physical quality of life index.
Answer:
Importance aspects of the index of physical quality of life:

  • For any country, as the value of PQLI approaches 100, better becomes the performance of all the 3 indices of PQLI of that country.
  • PQLI approaching 0 indicates that the performance of all the 3 indices of PQLI of the country is bad.
  • PQLI is always between 0 to 100.
  • PQLI can be used to compare two states within the country or two different countries.
  • Higher the PQLI more is the economic development.
  • Lower the PQLI, lesser is the economic development.

Question 23.
List out the positive aspects of PQLI.
Answer:
Positive aspects of PQLI:

  • PQLI includes factors associated with standards of human life such as like literacy, life expectancy, etc.
  • PQLI is a better index when compared to the per capita income index.
  • PQLI as an indicator of economic development has lesser drawbacks compared to national income and per capita income.
  • With PQLI comparisons can be made between different countries, different groups of countries or even different states of the same country.
  • We can create PQLI for urban-rural areas, females-males and then compare, them.

GSEB Solutions Class 12 Economics Chapter 2 Indicators of Growth and Development

Question 24.
Give an introduction of the most recently developed indicators of development. OR What is HDI? Explain briefly.
Answer:
Human Development Index:

  • The most recent indicator of development is the Human Development Index.
  • When United Nations Development Programme (UNDP) presented the Human Development Report (HDR) in 1990, it also introduced Human Development Index as a measure of development.
  • HDI emphasized on both economic as well as non-economic measures. Indian economists have also made a major contribution in preparing HDI.
  • The index is prepared by calculating the efforts made by each country for country’s development.
  • Improvements were introduced in the year 2010 in the minimum and maximum values which were used to measure HDI since 1990.

Question 25.
State the important aspects of HDI.
Answer:
important aspects of HDI:

  • The value of HDI ranges from 0 to 1.
  • The maximum value of HDI is 1 which is based on three standards namely life expectancy, knowledge and good standard of living.
  • The country whose HDI data is closer to 1 is considered more developed. It gets higher ranking in HDI.
    The country whose HDI value is away from 1 is considered less developed. It gets lower ranking in HDI.
  • According to data of 2014 out of 188 countries, Norway ranked number 1 with 0.944 points while India ranked 130th with 0.609 points.

Question 26.
Explain standard of living as an indicator of HDI.
Answer:
Determinants of Human Development Index:

  • To keep things simple, HDI is prepared using three factors namely,
    1. Life expectancy,
    2. Education and
    3. Income.
  • Life expectancy refers to the expected number of years a child will live at the time of birth, data on education depicts social achievements whereas income data depicts the standard of living.
  • Note that while calculating HDI instead of considering absolute values, average of all the three values is measured.

GSEB Solutions Class 12 Economics Chapter 2 Indicators of Growth and Development 2

GSEB Solutions Class 12 Economics Chapter 2 Indicators of Growth and Development

Question 27.
How is knowledge level assessed for developing HDI?
Answer:
Determinants of Human Development Index:

  • To keep things simple, HDI is prepared using three factors namely,
    (1) Life expectancy,
    (2) Education and
    (3) Income.
  • Life expectancy refers to the expected number of years a child will live at the time of birth, data on education depicts social achievements whereas income data depicts the standard of living.
  • Note that while calculating HDI instead of considering absolute values, average of all the three values is measured.

GSEB Solutions Class 12 Economics Chapter 2 Indicators of Growth and Development 2

Question 28.
How does HDR-2015 divide the world countries? What do you analyse from the report?
Answer:
The Human Development Report (HDR) of 2014 was published in 2015. The report gave HDI for 188 countries. It classified these countries into four parts on the basis of human development.

They are:

  1. Countries having highest (maximum) human development: The average value of HDI of 1st to 49th ranking countries was 0.890.
  2. Countries having high human development: Average value of HDI of 50,h to 105th ranking countries was 0.735.
  3. Countries with moderate human development: Average value of HDI of 106th to 143rd ranking countries was 0.614.

Countries having low human development:

  • Average value of HDI of 144th to 188th ranking countries was 0.493. Analysis of the HDI pf 2015:
  • Norway stood at number 1 position with HDI of 0.944.
  • Out of 188 countries India stood at 130th position with HDI of 0.609.
  • Comparing India’s position with the four divisions given above we can say that India comes in the category of countries with moderate human development.
  • Niger in Africa has an HDI of 0.348 and comes last in the order of HDI of 2015.

GSEB Solutions Class 12 Economics Chapter 2 Indicators of Growth and Development

Question 29.
State the importance of Human Development Index.
Answer:
Importance of Human Development Index (HDI):

  • HDI includes economic factors as well as social welfare by giving importance to education and health. This makes HDI the best and complete in itself so far.
  • HDI indicates the policy makers that economic development is just a tool and that the ultimate objective of development is human welfare.
  • According to HDI, True progress = Economic progress + Social progress. HDI works as a function. Rise in the HDI ranking indicates that health and education have improved in the country.
    By studying the HDI, developing countries get an idea as to where there is scope for development and in which direction should the government work.
  • HDI is progressive in its approach.

Question 30.
State the limitations of Human Development Index.
Answer:
Limitations of HDI:

  • HDI includes only three social indicators. It should also include other social indicators.
  • All three indicators are given equal weightage. But in reality, with respect to time and situation different indicators may have different importance.
  • Human Development Index is not an absolute expression. Since it compares one country with the other it shows relative progress. So, one cannot say how far has India developed individually by studying the HDI.

GSEB Solutions Class 12 Economics Chapter 2 Indicators of Growth and Development

Question 31.
State the various indices to measure development of a nation.
Answer:
The various indices to measure development of a nation are;

  1. PQLI – Physical Quality of Life Index
  2. HDI – Human Development Index
  3. GDI – Gender Development Index
  4. TAI – Technological Achievement Index
  5. HPI – Human Poverty Index
  6. HCI – Human Consumer Index

Question 32.
Developed countries aim at maintaining economic growth while developed countries aim at attaining speedy economic development. Explain.
Answer:
1. As per economics, first a county increases its output, national income and per capita income. Rise in these indicators gives the country the title of developing country.

2. Huge population, large scale unemployment, poor infrastructure, less level of literacy and not so good health facilities are the characteristics of a developing nation. Such nations first need to increase national income and per capita income so that there is more supply of money in the economy.

3. In the second stage the developing countries aim at achieving development. They try to improve the standard of living of people by providing them health and education facilities, opportunities to earn more income, etc. When they achieve these they fall into the category of developed nation.

4. The developed nations are called developed because they have already reached a very high economic growth as well as development. After reaching a certain level the growth does not rise as fast as in the case of developing nations.

The focus of developed nations is then to maintain the standard of living i.e. the development it has achieved. To maintain this, the nations’ economic growth-rate should be maintained.

5. Hence, the developed nations aim for economic growth whereas the developing nations aim for economic development.

Multiple Choice Questions

Question 1.
The most important objective of the countries of the world especially after World war-II has been
(A) Economic development
(B) Economic gain
(C) Social welfaie
(D) Economic and political stability
Answer:
(A) Economic development

Question 2.
Since when did the terms ‘economic growth’ and ‘economic development’ caught eyes of the world?
(A) After 1914
(B) After 1944
(C) After 1919
(D) After 1947
Answer:
(B) After 1944

GSEB Solutions Class 12 Economics Chapter 2 Indicators of Growth and Development

Question 3.
Developing countries: Economic development; Developed countries:
(A) Social welfare
(B) Economic growth
(C) Economic development
(D) Both (A) and (B)
Answer:
(B) Economic growth

Question 4.
Economic growth means long run
(A) Rise in standard of living
(B) Rise in total output of the country
(C) Important in social infrastructure as well as per capita income
(D) Both (A) and (C)
Answer:
(B) Rise in total output of the country

Question 5.
What rises on a continuous basis in a developing country?
(A) Real national income
(B) Gross national income
(C) Real per capita income
(D) Both (A) and (C)
Answer:
(D) Both (A) and (C)

Question 6.
“Economic growth refers to growth rate of national income or rise in total quantum of goods”. Whose opinion is this?
(A) Simen Kuznets
(B) Micheal Todaro
(C) Urshula Hicks
(D) Prof. Hansen
Answer:
(D) Prof. Hansen

GSEB Solutions Class 12 Economics Chapter 2 Indicators of Growth and Development

Question 7.
What does not take place in economic growth?
(A) Qualitative changes
(B) Institutional changes
(C) Psychological factors
(D) All of these
Answer:
(D) All of these

Question 8.
Economic growth ignores
(A) Welfare
(B) National income
(C) Per capita income
(D) Output
Answer:
(A) Welfare

Question 9.
Economic development aims at
(A) Economic growth
(B) Economic progress
(C) Economic welfare
(D) All of these
Answer:
(D) All of these

Question 10.
What does not change during economic development?
(A) Social structure
(B) Production techniques
(C) Structure of national income
(D) None of these
Answer:
(D) None of these

GSEB Solutions Class 12 Economics Chapter 2 Indicators of Growth and Development

Question 11.
As per Michael Todaro,
(A) Economic development is such a process where there is no increase in the population living below poverty line.
(B) Economic development increases the factors of production.
(C) Economic development is a multidimensional process.
(D) Economic development is a long term increase in capacity of a country.
Answer:
(C) Economic development is a multidimensional process.

Question 12.
Which of the following is not a characteristic of economic development?
(A) Change in technology
(B) Qualitative and quantitative changes occur
(C) It is a onetime process
(D) Labour becomes more dynamic
Answer:
(C) It is a onetime process

Question 13.
After a stage, economic development
(A) Becomes self-motivating
(B) Needs more thrust
(C) Fades and growth takes over
(D) Becomes stagnant
Answer:
(A) Becomes self-motivating

GSEB Solutions Class 12 Economics Chapter 2 Indicators of Growth and Development

Question 14.
What can economic development not indicate?
(A) Rise in national growth
(B) Improvement in human progress
(C) Improvement in education structure
(D) Rise in total output
Answer:
(B) Improvement in human progress

Question 15.
It is quite possible that, economic development
(A) Prosperity
(B) Growth in income
(C) Improved standard of living
(D) Reduction in poverty
Answer:
(C) Improved standard of living

Question 16.
Which of the following is not an indicates of development?
(A) PQLI
(B) Rate of growth of national income
(C) HDI
(D) None of these
Answer:
(D) None of these

GSEB Solutions Class 12 Economics Chapter 2 Indicators of Growth and Development

Question 17.
As per World Bank, the growth rate of national income of Sri Lanka in 2015-16 was %.
(A) 2.4
(B) 4.7
(C) 4.5
(D) 7.3
Answer:
(C) 4.5

Question 18.
_______ showed second highest growth rate in national income of 2015-16.
(A) China
(B) America
(C) Sri Lanka
(D) Germany
Answer:
(B) America

Question 19.
Norway and America grow by per annum as per World Bank and Economic survey of 2015-16.
(A) 1 – 1.5%
(B) 2.4 – 4.5%
(C) 3 – 5%
(D) 2 – 3%
Answer:
(D) 2 – 3%

GSEB Solutions Class 12 Economics Chapter 2 Indicators of Growth and Development

Question 20.
Which of the following is not a problem for calculating true national income?
(A) Tax avoidance
(B) Double counting
(C) Barter transactions
(D) None of these
Answer:
(D) None of these

Question 21.
Which is the most suitable method of calculating national income?
(A) Production method
(B) Income method
(C) Expenditure method
(D) Can’t say
Answer:
(D) Can’t say

Question 22.
Who has recommended per capita income as an indicator of economic development?
(A) UNO
(B) WB
(C) WHO
(D) RBI
Answer:
(A) UNO

Question 23.
Development is not a development in true sense if
(A) It does not increase economic infrastructure
(B) If does not increase GDP
(C) It does not improve the standard of living
(D) If does not increase social status
Answer:
(C) It does not improve the standard of living

GSEB Solutions Class 12 Economics Chapter 2 Indicators of Growth and Development

Question 24.
America : $ 52,947; Norway : $ ____
(A) 47,293
(B) 51,329
(C) 68,191
(D) 64,992
Answer:
(D) 64,992

Question 25.
China : $ 12,547; India : $ ____
(A) 5497
(B) 11,230
(C) 4866
(D) 14,256
Answer:
(A) 5497

Question 26.
____ income growth rate of India :
(A) 2.6
(B) 6.0
(C) 0.5
(D) 1.1
Answer:
(B) 6.0

Question 27.
Norway’s per capita income in 2015-16 was _______ times higher than India.
(A) 3-4
(B) 11-12
(C) 9
(D) 6-8
Answer:
(B) 11-12

GSEB Solutions Class 12 Economics Chapter 2 Indicators of Growth and Development

Question 28.
Limitation of per capita income as an indicator is that
(A) It shows only average
(B) It ignores income of poor class
(C) It does not include earning of non-productive age
(D) Per capita income reveals more than necessary
Answer:
(A) It shows only average

Question 29.
Consumption of what determines the living standard as per physical quality of life?
(A) Food, fuel and other non-durable goods
(B) Durable and semi-durable goods
(C) Services during a period of time by a person
(D) All of these
Answer:
(D) All of these

Question 30.
Which aspect is not include in physical quality of life?
(A) Housing and clothing
(B) Calories, fats and proteins consumed
(C) Entertainment
(D) Number of holidays per year
Answer:
(D) Number of holidays per year

Question 31.
Physical quality of life considers aspects.
(A) 3
(B) 5
(C) 7
(D) 10
Answer:
(D) 10

GSEB Solutions Class 12 Economics Chapter 2 Indicators of Growth and Development

Question 32.
Who developed PQLI?
(A) Morris
(B) Machlup
(C) Todaro
(D) Hansen
Answer:
(A) Morris

Question 33.
Which of the following is not a determinant of PQLI?
(A) Extent of education
(B) Infant mortality rate
(C) Life expectancy
(D) Per capita income
Answer:
(D) Per capita income

Question 34.
Which of the following is the correct reason for only three determinants in PQLI?
(A) All the three determinants selected depicts the results and not efforts
(B) Dependable data for all these factors can be obtained for all the countries
(C) All the three factors are product based
(D) All of these
Answer:
(D) All of these

Question 35.
Maximum point that a determinant of PQLI can get is
(A) 1
(B) 10
(C) 100
(D) 3
Answer:
(C) 100

GSEB Solutions Class 12 Economics Chapter 2 Indicators of Growth and Development

Question 36.
PQLI lies between _______
(A) -10 to 10
(B) 0 to 100
(C) 0 to 10
(D) -100 to 100
Answer:
(B) 0 to 100

Question 37.
PQLI _______ Development
(A) High, high
(B) Low, high
(C) High, low
(D) Both (B) and (C)
Answer:
(A) High, high

Question 38.
Which of the following is best?
(A) Economic growth
(B) Economic development
(C) HDI
(D) PQLI
Answer:
(C) HDI

Question 39.
PQLI ignores _______
(A) Income
(B) Infant mortality
(C) Education
(D) Life expectancy
Answer:
(A) Income

GSEB Solutions Class 12 Economics Chapter 2 Indicators of Growth and Development

Question 40.
Who gave HDI?
(A) UNO
(B) Morris
(C) UNDP
(D) WTO
Answer:
(C) UNDP

Question 41.
HDI was presented in the Human Development Report of
(A) 1944
(B) 2001
(C) 1979
(D) 1990
Answer:
(D) 1990

Question 42.
When were improvements introduced in the minimum and maximum values of HDR?
(A) In 2010
(B) In 2001
(C) In 2000
(D) In 2003
Answer:
(A) In 2010

Question 43.
Which of the following is incorrect with respect to HDI?
(A) Life expectancy
(B) Good standard of living
(C) Knowledge
(D) Infant mortality
Answer:
(D) Infant mortality

GSEB Solutions Class 12 Economics Chapter 2 Indicators of Growth and Development

Question 44.
To calculate the rate of education to be included in HDI, people in the age group of or above are included.
(A) 21
(B) 15
(C) 14
(D) 18
Answer:
(B) 15

Question 45.
According to data of 2014, Norway’s HDI was
(A) 0.944
(B) 0.609
(C) 0.912
(D) 0.875
Answer:
(A) 0.944

Question 46.
India : 0.609; Pakistan : _______
(A) 0.727
(B) 0.701
(C) 0.348
(D) 0.538
Answer:
(D) 0.538

Question 47.
The HDI of 2015, classified countries into groups.
(A) 2
(B) 3
(C) 4
(D) 6
Answer:
(C) 4

Question 48.
in 2014, India ranked In HDI.
(A) 127th
(B) 130th
(C) 142nd
(D) 136th
Answer:
(B) 130th

GSEB Solutions Class 12 Economics Chapter 2 Indicators of Growth and Development

Question 49.
Which country comes at the last in HDI of 2015?
(A) Sri Lanka
(B) Pakistan
(C) Niger
(D) Turkistan
Answer:
(C) Niger

Question 50.
True progress =
(A) Economic progress + social progress
(B) Economic progress + national progress
(C) Economic progress + national progress + individual progress
(D) National progress + individual progress
Answer:
(A) Economic progress + social progress

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