Table of Contents
"For Teachers"

Gross national product (GNP) per capita is the dollar value of a country’s final output of goods and services in a year, divided by its population. It reflects the average income of a country’s citizens. Knowing a country’s GNP per capita is a good first step toward understanding its economic strengths and needs.

Exploring the GNP per Capita Text

1. Read the definition of GNP per capita and answer the following questions:

1. What does this indicator measure? [GNP per capita measures the average income of a country’s citizens. It shows what part of a country’s GNP each person would have if GNP were divided equally.]
2. Why is knowing GNP per capita helpful in studying development? [It is a good first step toward understanding a country’s economic strengths and needs, as well as the general standard of living enjoyed by the average citizen.]

2. Read the definitions of low-income, middle-income and high-income countries and answer the following questions:

1. What was the highest GNP per capita a country could have in 1995 to be included among the low-income countries? [$765]
2. What would you expect the general living conditions to be like in a low-income country? [There would probably be a lower standard of living than in middle- and high-income countries; there would be few goods and services available to the general public; and many people would not be able to meet their basic needs.]
3. What was the range of GNP per capita for middle-income countries in 1995? [$766-$9,386]
4. What would you expect the general living conditions to be like in a middle-income country? [The standard of living would probably be higher than in a low-income country, but lower than a high-income country. People would have access to more goods and services than in a low-income country, but many people still would not be able to meet their basic needs.]
5. What was the range of GNP per capita for high-income countries in 1995? [$9,387 and above]
6. What would you expect the general living conditions to be like in a high-income country? [The standard of living would probably be higher than in low- and middle-income countries, with more access to goods and services. Most people would probably be able to meet their basic needs, but would still have things that they want.]

3. The items listed below would be included in calculating a country’s GNP. Which items are goods? Which are services?

• food [good]
• housing [good]
• teachers’ salaries [service]
• home computers [good]
• getting a haircut at the hairdressers [service]

4. Answer each of the following questions briefly, referring back to the text if necessary.

1. Name three factors that influence economic growth. [Some factors that influence economic growth include the health, education, and skill levels of the labor force; transportation, communication, and energy systems; quality of tools and technology; access to raw materials and capital; fair wages and prices for goods and services; savings and investment; value and variety of exports; and access to world markets.]
2. How can population growth rate affect the GNP per capita growth rate? [Assuming that GNP stays the same, the higher the population growth rate, the lower the GNP per capita growth rate. If the population growth rate is slower than the GNP growth rate, the GNP per capita growth rate is positive; if the population growth rate equals the GNP growth rate, the GNP per capita growth rate is zero; and if the population growth rate is faster than the GNP growth rate, the GNP per capita growth rate is negative.(For more in-depth information, read growth rates.)]
3. Does GNP per capita give a complete picture of the standard of living of all people in a country? Why or why not? [No, because it is an average. GNP per capita does not show how income is distributed. And although it shows the average income, it does not show whether people lead fulfilling lives. In addition, it does not include unreported income from the informal sector, nor show what goods and services are available and how much people can buy with their money.]

5. Calculate GNP per capita for countries A and B using this formula: GNP � Population = GNP per capita

Based on your answers, identify each country as low income, middle income, or high income. [Country A is low income; country B is high income.]

6. Use the population information in the table below to answer the question that follows.

How many times greater is the average GNP per capita of high-income countries than that of low-income countries? [$24,930 � $430 = 58 times]

7. Read the definition of growth rates, then calculate the annual GNP per capita growth rates for countries A and B using the following formula:

Note: Average annual growth rates of GNP per capita for a period of years provide a better picture than rates for a single year. Calculating any growth rate for a period longer than a year requires more complicated mathematical formulas than the one used to calculate an annual rate.

8. Purchasing power parity (PPP) is used to compare how much a dollar can buy in different countries. If GNP per capita goes up after being adjusted for PPP, one can buy more goods and services than the GNP per capita figure would suggest. If it goes down after adjustment, one can buy less than the figure would suggest. Look at the following table and answer the questions below.

1. In which country would you be able to purchase more with a dollar? [Country A]
2. In which country is the average person likely to have the better standard of living? [Country B]
3. Based on these data, in which country would you prefer to live? Explain your answer.[Probably in country B, because even though you can buy less with each dollar, the value of your per capita income is still greater than in country A.]

9. Natural resource accounting tries to measure and allow for the costs of depleting natural resources and degrading the environment that can be part of economic growth. Listed below are some products that would add value to a country’s GNP. For each product, list some potential environmental and resource costs that might not be recognized in GNP, but which would be included in natural resource accounting.

Product	Potential environmental and resource costs
Wood furniture	[Possible answer: Cutting down trees for wood could result in lack of trees for future use; decrease in the Earth’s ability to purify air; soil erosion which could make land less fertile and increase dangers of flooding; silting; loss of habitat for wildlife; and decrease in biodiversity.]
Food crops	[Possible answer: Growing food crops such as maize could result in soil erosion which can make land less fertile and increase dangers of flooding; silting; water pollution from pesticides and fertilizers; and loss of soil nutrients. Farmers’ use of irrigation could deplete fresh water resources or cause salinization of the soil which happens when fields are over-irrigated.]
Electricity from a coal burning plant	[Possible answer: Mining the coal could result in a lack of coal for future energy use and land degradation of the mining area, which could result in a loss of habitat for wildlife. Burning coal for electricity could result in air pollution; acid rain; pollution of rivers and lakes; destruction of fisheries; decrease in biodiversity; and decreased crop yields.]

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GNP per Capita, 1995

1. According to the map key, which color represents low-income economies? [orange] Which color represents middle-income economies? [yellow] Which color represents high-income economies? [green]

2. Find Argentina, Germany, India, South Africa, and United Arab Emirates on the map. What income group does each country belong to? [Argentina and South Africa are middle income; Egypt and India are low income; Germany is high income] Compare the color of each country with those of its neighbors. To what extent is each country typical of conditions in its area and region? [Argentina and India are typical of their regions; Germany and Egypt are somewhat typical of their regions; South Africa is less typical of its region.]

3. Which income group is most represented in Sub-Saharan Africa? [low income] South America? [middle income] North America? [high income]

Chart 1. Population, GNP, and GNP per Capita, 1995

Exploring Chart 1

1. Study Chart 1 which shows GNP, population, and GNP per capita for low- and middle-income and high-income countries. What does it show you about the differences in the production of goods and services between high-income countries and low- and middle-income countries? [Production of goods and services in low- and middle-income countries is much less than in high-income countries, and population is much larger; therefore, on average, each person gets a much smaller share of total production.]

2. Compare GNP per capita in low- and middle-income and high-income countries.

1. Refer to the Data Table and choose four countries—your own, one low-income, one middle-income, and one high-income. [Answers will vary.]
2. Refer to column 5 in the Data Table and find the GNP per capita in 1995 for each country you selected. [Answers will vary.]
3. How many times larger is GNP per capita in the high-income country than in the low-income and middle-income countries? (Divide GNP per capita in the high-income country by GNP per capita in each of the developing countries.) [Answers will vary.]
4. How many times larger or smaller is the GNP per capita in your country than that in the middle-income country? [Answers will vary.]

3. If a country slows down its population growth rate, is its GNP per capita likely to increase or decrease? [Increase, because there are fewer people to share the wealth than there would have been at the original rate of population growth.]

4. Based on the text and your own knowledge, list three possible social and three possible economic reasons for the difference in productivity between high-income and low- and middle-income countries. [Social: population growth rate, health of population, education and work skills of population. Economic: value and variety of exports, access to world markets, wages and prices for goods and services, savings and investment rate, access to raw materials and capital, access to machines and technology, government policies]

Chart 2. Growth of GNP, Population, and GNP per capita,
1980-1995 (with and without China & India)

Exploring Chart 2

1. Read the definition of growth rates then use the data from Chart 2 to complete the following table:

2. When calculating data trends by country income groups, the low-income country group data are frequently calculated both with and without China and India. This is because China and India are so large that trends in their individual populations, economies, and environments can overshadow trends throughout the remaining countries in the group.

1. Looking at Chart 2, how do the low-income country growth rates with and without China and India compare? [The GNP growth rate with China and India is much higher than without; the population growth rate is lower with China and India than without; and the GNP per capita growth rate is much higher with China and India than without. In fact, when China and India are included among the low-income countries, the GNP per capita growth rate is the highest of all the income groups, and when China and India are not included, it drops to the lowest.]
2. What do these comparisons tell you about growth rates of GNP, population, and GNP per capita in China and India? [China and India’s combined GNP growth rate is higher than most other low-income countries; their combined population growth rate is lower; and their combined GNP per capita growth rate is higher.]

3. Study the growth rate data from the table you created for question 1. Imagine you are the leader of a country and have pledged to improve the standard of living for your average citizens. Which income group’s GNP growth rate would you try to match? Explain. [The low-income countries with China and India because their GNP growth rate is the highest of any group.] Which income group’s population growth rate would you try to imitate? Explain. [The high-income countries, because their population growth rate is the lowest of any group.] Why would this be a good combination? [Because a high GNP growth rate coupled with a low population growth rate would result in a high GNP per capita growth rate. This would mean that the average person’s standard of living would most likely improve.]

4. Looking back at the text and at the data in the table you created for question 1, argue for or against the following statement:

Raising standards of living in low-income countries depends on one thing only: reducing population growth.

Chart 3. Income Distribution in Three Countries for
Percentage of Households

Exploring Chart 3

1. Chart 3 shows the percentage of GNP earned by the richest 20 percent, middle 60 percent, and poorest 20 percent of a low-income, middle-income, and high-income country (actual percentages are given in the table above).

1. Compare the portion of GNP earned by the poorest 20 percent of each of the countries. How much difference is there between the countries? [Not much. Across all three countries, the poorest 20% earns only about 7% of the GNP.]
2. In which country does the "middle class" get the largest percentage of income? [United Kingdom] How does this compare with the other two countries? [It is very similar.]
3. In which country does the wealthiest class receive the largest percentage of income? [Tanzania] How does this compare with the other two countries? [It is very similar.]
4. Make a statement that describes the patterns of income distribution in these three countries. [Possible answer: Regardless of whether a country is rich or poor, income distribution is unequal, with the richest people getting much more than the poorest people.]

2. Since national income tends to be closely related to quality of life indicators, what patterns would you expect to see in life expectancies, literacy rates, and access to safe water and sanitation among rich and poor people within nations? [The rich probably would have higher rates of life expectancy, literacy, and access to safe water and sanitation than the poor of the same country, unless the government and others instituted policies or programs to improve health, education, and water and sanitation services to those who can least afford them.]

3. Look at Chart 3.1 to see the actual average per capita incomes for the richest, middle, and poorest groups of people in these three countries.

1. How does the average per capita income of the richest 20 percent of Tanzania compare with that of the poorest 20 percent of Morocco? [The poorest 20% of people in Morocco earn more on average than the richest 20% of Tanzania.]
2. How does the average per capita income of the richest 20 percent of Morocco compare with that of the poorest 20 percent of the United Kingdom? [The poorest 20% of the people in the United Kingdom earn more on average than the richest 20% of Morocco.]
3. Based solely on average per capita income, it would appear that everyone, even the poor in the United Kingdom would have a better standard of living than people in Morocco or Tanzania. What factors would change that? [If the cost of living were much higher in the United Kingdom than in the other countries, they might not be able to buy as much with their income as people in other countries. Also, if in a wealthier country everyone appears to have more things, the poorest segment of the population in these countries may feel more deprived than the poorest in less wealthy nations. Similarly, people who are in the richest 20% of the population in Tanzania and Morocco may feel wealthier than the poorest 20% in the United Kingdom because they are able to afford more goods and services than others in their countries. ]

1. Read the definition of purchasing power parity (PPP), then compare the GNP per capita and the PPP columns in the Data Table. In which countries is the GNP per capita higher than the GNP per capita adjusted for PPP? [Hong Kong, Japan, Singapore, Austria, Belgium, Denmark, Finland, France, Germany, the Netherlands, Norway, Sweden, Switzerland, and United Arab Emirates.] In which income group are these countries? [High-income] What does this tell you about the cost of goods and services in these countries? [Goods and services tend to be more costly in these countries than in others. People here may have high per capita incomes, but they are not able to buy as much with each dollar.]

2. Make a copy of the blank Comparative Data Table and label the first column Countries, the second column GNP per capita, 1995, the third Population growth rate, 1980-95, the fourth Access to safe water, 1989-95, and the fifth Access to sanitation, 1989-95. Then, using the text and the Data Table, fill in the chart according to the instructions below.

1. Choose a low-income country in Sub-Saharan Africa and one in Asia (South and East) and the Pacific and write their names in the first column.
2. Choose a middle-income country in Europe and Central Asia, one in Middle East and North Africa, and one in South America, and add them to the first column.
3. Choose a high-income country in North and Central America and the Caribbean, one in Europe and Central Asia, and one in Asia (South and East) and the Pacific and add them to the first column.
4. Label each country in your data table with an L, M, or H to show which income group it belongs to: low, middle, or high.
5. Read the definitions of GNP per capita, population growth rate, access to safe water, and access to sanitation. Go to the Data Table, and for each of your countries, find the 1995 GNP per capita, 1980-95 population growth rate, 1989-95 percentage of population with access to safe water and 1989-95 percentage of population with access to sanitation, and write this information in the appropriate columns. If data for one of the indicators are not available, select another country from the same income group and region.
6. Rank the countries, with "1" equaling the highest GNP per capita and "8" equaling the lowest. Write the appropriate ranking number in parentheses after the data in column 2.
7. Study your chart and answer the following questions:
   • In the countries with the lowest GNP per capita, are the other indicators high or low?
   • In the middle-income countries, are the other indicators higher or lower than in the low-income countries?
   • In the high-income countries, are the other indicators higher or lower than in the developing countries?
8. Based on your chart, is GNP per capita a good general indicator of the standard of living of a country? Why or why not?

3. Make a copy of the blank Comparative Data Table and label the first column Countries, the second column GNP per capita, 1995, and the third column GNP per capita, PPP, 1995. Compare GNP per capita and GNP per capita adjusted for PPP in six countries from six different regions of the world by following these steps:

1. In the column at the left of the table, write the following countries and their regions. Brazil (South America); Ghana (Sub-Saharan Africa); Philippines (Asia, South and East, and the Pacific); Egypt (Middle East and North Africa); Canada (North and Central America and the Caribbean); Russian Federation (Europe and Central Asia).
2. Use the Data Table to find the GNP per capita for each country and fill in column 2 in your table.
3. Use the Data Table to find the GNP per capita adjusted for PPP for each country and fill in column 3 in your table. Are there any substantial changes in GNP per capita when it is adjusted for purchasing power parity? [For each country, the numbers in the PPP column are larger than the numbers in the GNP per capita column, ranging from Canada with a 9 % difference to Ghana where the numbers more than quadruple. Except for Canada and Brazil, the GNP per capita adusted for PPP was more than double the GNP per capita. This means the average income in each of these countries can buy more goods and services than is readily apparent looking at the GNP per capita.]
4. On a separate piece of paper, classify each country as low, middle, or high income according to its GNP per capita adjusted for PPP. Did any of the countries change from one classification to another? What does this tell you about GNP per capita data? [Yes, Ghana moved from low- to middle-income.] What does this tell you about GNP per capita data? [While GNP per capita data give an accurate indication of the dollar value of a nation’s economy, they do not always accurately reflect how much each dollar is worth within that country. As a result, the categories of low-, middle-, and high-income, although accurate according to actual dollar amounts, may not reflect the true per capita purchasing power within countries.]

4. Take the Comparative Data Table you prepared for question 2 above, and add a sixth column labeled GNP per capita, PPP, 1995.

1. Use the Data Table to find the GNP per capita adjusted for PPP for each of your countries and fill in column 6 in your table. Are there any substantial changes in GNP per capita of each country when that GNP per capita is adjusted for purchasing power parity? [Answers will vary.]
2. On a separate piece of paper, classify each country as low, middle, or high income according to its GNP per capita adjusted for PPP. Did any of the countries change from one classification to another? [Answers will vary.]
3. Are differences between GNP per capita and GNP per capita adjusted for PPP reflected in any of the other indicators for the countries you chose? Explain. (For example, if one of your countries shifts from a middle-income to a high-income country when its GNP per capita is adjusted for PPP, does that country have a higher percentage of its population with access to safe water and sanitation than your other middle-income countries?) [Answers will vary]

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   Loading Bananas, Ecuador
   

   Exploring Photo 1

   1. Look at the photograph. Describe what you see.

   [Men are loading bananas onto a ship.]

   2. Would this be a common scene in your country? Why or why not? [ Answers will vary.]

   3. In which country was this photograph taken? [Ecuador]

   4. Find the country in the world and regional map gallery. What region is it in? [South America]

   5. Find the country in the Data Table and determine if it is a low-, middle-, or high-income economy. [It is a middle-income economy.]
   6. According to the Data Table, what is this country's projected population growth rate for 1995-2010? [1.7%] Its 1995 GNP per capita? [$1,390] Its 1989-1995 percentage of population with access to safe water? [70%]
   7. What do you think life is like for the average person in this country? Support your answer. [Answers will vary, but should take into account the possible effects of the population growth rate, the GNP per capita, and the percentage of the population with access to safe water on the quality of life.]
   8. What, if any, aspects of the activity shown in the photograph might help improve living standards in industrial countries? [Possible answer: Industrial countries will have access to goods (bananas) that they may not be able to grow in their own countries.] In developing countries? [Possible answer: People in developing countries can export goods (bananas) to industrial countries in order to import goods and services that might not be available in their countries.]
   9. Which sector of development (i.e., social, economic or environmental) is best represented by the photograph? Explain your answer. Is it possible for this photograph to represent other sectors as well? In what way? [Answers will vary.]
   10. To what extent does the activity in the photograph demonstrate sustainable development? Explain your answer. [Answers will vary.]

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   Computer Work, Thailand
   

   Exploring Photo 2

   1. Look at the photograph. Describe what you see.

   [A man is working at a computer.]

   2. Would this be a common scene in your country? Why or why not? [Answers will vary.]

   3. In which country was this photograph taken? [Thailand]

   4. Find the country in the world and regional map gallery. What region is it in? [Asia (South and East) and the Pacific]

   5. Find the country in the Data Table and determine if it is a low-, middle-, or high-income economy. [It is a middle-income economy.]
   6. According to the Data Table, what is this country's projected population growth rate for 1995-2010? [0.7%] its 1995 GNP per capita? [$2,740] its 1989-1995 percentage of population with access to safe water? [81%]
   7. What do you think life is like for the average person in this country? Support your answer. [Answers will vary, but should take into account the possible effects of the population growth rate, the GNP per capita, and the percentage of the population with access to safe water on the quality of life.]
   8. What, if any, aspects of the activity shown in the photograph might help improve living standards in industrial countries? In developing countries? [Possible answer: For both industrial and developing countries, computer technologies can help increase worker productivity and increase GNP per capita, which in turn can improve living standards.]
   9. Which sector of development (i.e., social, economic or environmental) is best represented by the photograph? Explain your answer. Is it possible for this photograph to represent other sectors as well? In what way? [Answers will vary.]
   10. To what extent does the activity in the photograph demonstrate sustainable development? Explain your answer. [Answers will vary.]

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   Exploring GNP per Capita Case Study 1

   1. Before receiving her loan, how did Mala and her husband support their family? [They worked on their land. They were tied to the growing seasons.]

   2. What did Mala use her SHARE loan for? [She bought a cow and a goat.]

   3. Aside from giving some additional income, how did Mala’s investment add to the financial stability of the family? [It helped to ensure that the family had income throughout the year, not just at planting and harvest times.]

   4. Why didn’t Mala use the money she borrowed from SHARE to pay for the roof and her children’s shoes? [By investing in the cow and goat, she could ensure that she would have profits for years to come which she could use to pay back the loan as well as buy things her family needed. If she had used the money to buy shoes and a roof at the beginning, she would have had no means of paying the money back, nor would she have been able to buy other things for her family later on.]

   5. Who are the clients served by the SHARE loan program? [The clients of the SHARE program are poor women in developing countries who would otherwise have no access to credit to develop their businesses.]

   6. How does microfinance work? [People who cannot get regular loans because they are poor credit risks are able to come together and borrow money as a group. They take joint responsibility for the repayment of their loan. The recipients of the loans invest the money in their businesses--for example by buying new equipment, farm animals, or seed, or by hiring additional employees--in order to make their businesses grow at a faster rate and make greater profits. Studies show that the money made from the investment usually goes toward food, shelter, clothing, or education for the family, thus increasing the chance that the generations that follow will be healthier and more financially secure than their parents.]

   7. How can microfinance, which works on a small, individual level, affect the larger economy? [By lending money to poor people to start their own businesses, microfinancing helps to improve individual standards of living. Beyond that, recipients of microfinance loans contribute to the national economy by producing more goods and services and often hiring others to work for them. And with the additional money they earn, they can buy more goods and services, again adding to the national economy. In addition, microfinancing can help more people move from the informal economy to the formal.]

   8. This case study shows how microfinancing works in developing economies. Would industrial economies be able to benefit from a similar system? Explain your answer. [Answers will vary.]

   9. How do people get small business loans where you live? How well does the system work? Explain your answer. [Answers will vary.]

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   GNP per Capita Research & Explore

   1. Listed below are some activities that would help increase a country's GNP per capita growth. Assume that you are an officer in the Ministry of Planning. Because funds are limited, not all plans can be implemented at once.

   1. Rank the following activities in the order in which you would undertake them. Explain why you chose this ranking.
      • Resurface and broaden a highway for trucks carrying logs from the country’s largest forest to its only seaport.
      • Provide subsidized loans to banks so they can make small loans with low interest rates to 500 small business owners.
      • Equip twenty minibuses to provide health care and family planning services in rural areas; train and pay salaries of bus workers.
      • Train 100 secondary school graduates to teach in understaffed primary schools and to run adult literacy programs.
      • Train and equip fifty field workers and pay their salaries for a year; each trainee will teach 100 farmers to use a new planting technique that will help increase production.
      2. Are there any activities you would not undertake? Explain.
      3. Think of three additional programs that could help increase GNP per capita. Describe each program and explain how you would fit them into your ranking.

      2. How does your local government spend its money? Use your local newspaper, government offices, council members, and other sources to find out what community infrastructure projects (for example, roads, railways, buildings, telecommunications systems, energy supply systems, or water and sanitation systems) have been approved by your local government within the last year. Choose one project that is interesting to you, and answer the following questions:

      1. What is the nature of this project?
      2. Who will benefit from this project, everyone or a segment of the population? Explain your answer.
      3. How much will the project cost?
      4. Who will pay for the project? Are all of the funds public, or are there also private investments? If some of the funds are private, who are these investors and how do they intend to benefit from the project?
      5. Who will pay for maintenance?
      6. Were the environmental impacts of the project considered? Explain.
      7. Were there any people opposed to the project? If so, what were their arguments against the project? Were these arguments valid? Explain.
      8. In your opinion, will this project contribute to sustainable development? Explain.

      3. How has technology affected the workplace? Interview someone in your family or community who has performed the same work or has worked at the same company for more than twenty years to find out how technology has or has not altered their work productivity and environment and job security.

      1. Find out what your subject does and how long he or she has been in that position. Then ask the following questions:
         • Has the amount of technology you use in your job changed since you started working?
         • If no, are there any parts of your job that you think could benefit from using more technology? In what way?
         • If yes, how has technology affected the way in which you do your job?
         • What kind of training did you get with the new technology? Was it enough? Explain.
         • How has technology affected the number of people or the amount of time required to do your job?
         • How has technology affected the amount of pollution generated in the production process?
         • How has technology affected relationships among employees?
         • How has technology affected the quality of the product?
         • How has technology affected profits?
         2. List at least five additional questions you will ask when you interview your subject.
         3. Based on your interview, prepare an oral presentation or write a report discussing whether technological changes have contributed to sustainable development in your subject’s field of work.

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