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Economies across the world have been hit hard by COVID-19. The pandemic has resulted in a drop in GDP and the economic damage that the poorest households in the world will experience is quite evident. The Jamaican economy is no exception. It contracted by an estimated 5.7% in the 2021 January to March quarter, a fifth consecutive decline. In making this disclosure, Director General of the Planning Institute of Jamaica, Dr Wayne Henry, highlighted the serious effects this will have on Jamaica’s standard of living. Also significantly impacting performance of the economy was implementation of measures globally as well as locally to manage the pandemic relative to the corresponding quarter of 2020 when the economy operated normally in the first two months. Economists, however, have cautioned economic planners that although GDP gives a good indication of the economic health of an economy it should only be considered a rough gauge because of its limitations.
A. Differentiate GDP and GNP. (4 marks)
B. Highlight THREE (3) limitations of GDP which make economists conclude that it is not
a good measure of an economy’s economic health. (9 marks)
C. Define the term ‘standard of living’. (2 marks)
D. What method does Jamaica use to determine standard of living? (1 mark)
Use the following data to calculate Jamaica’s GDP. Use the INCOME approach.