Population — practice questions

Why GDP growth ≠ development:

• HDI falling despite 6% GDP growth → gains not reaching health, education, or income per capita broadly.
• Stagnant life expectancy (58) → healthcare, nutrition, sanitation failing — GDP may reflect extractive industries (mining) with limited spillovers.
• Low literacy (52%) → human capital not building — limits future productivity.
• Clean water access (60%) → basic welfare unmet. Calculation: With a population of 50 million, the number of people without clean water is $50,000,000 * 0.40 = 20,000,000$. This highlights a massive development failure.
• Possible causes: inequality (GDP concentrated), environmental degradation, informal economy excluded from data but households suffer.

Policy 1 — Human capital investment (education + health):

• Free primary education, teacher training → literacy rises → productivity, LRAS shifts right.
• Clean water and vaccination programmes → life expectancy rises → direct HDI improvement.
• Evaluation: fiscal cost high; benefits long-term; requires governance to prevent corruption.

Policy 2 — Sustainable infrastructure:

• Renewable energy, rural water systems → raises productivity and reduces environmental damage.
• Evaluation: may need foreign aid or FDI; avoids resource-depleting growth path.

Judgement: 6% GDP growth is misleading — development requires targeted social investment and sustainable practices, not aggregate output alone.

(a) Calculation of Income Index

The formula for the Income Index is: $Income Index = [ln(GNI per capita) - ln(minimum GNI)] / [ln(maximum GNI) - ln(minimum GNI)]$

Step 1: Identify the values.

• GNI per capita = $15,000$
• Minimum GNI = $100$
• Maximum GNI = $75,000$

Step 2: Calculate the natural logarithms (ln) of these values.

• ln(15000) ≈ 9.616
• ln(100) ≈ 4.605
• ln(75000) ≈ 11.225

Step 3: Substitute these values into the formula. $Income Index = (9.616 - 4.605) / (11.225 - 4.605)$ $Income Index = 5.011 / 6.620$

Step 4: Calculate the final value. Income Index ≈ 0.757

Answer: The Income Index for this country is approximately 0.757.

(b) Limitations of the Income Index

1. Ignores Income Inequality: The GNI per capita is a national average. It does not show how income is distributed. A high GNI per capita could be due to a small number of extremely wealthy individuals, while the majority of the population remains in poverty. The Gini coefficient would be a better measure for inequality.
2. Excludes Non-Market Activities: GNI only measures formal market transactions. It excludes unpaid work (like household chores or caring for relatives) and the informal or 'black' economy. In many developing countries, these sectors are substantial, so GNI per capita underestimates the true level of economic activity and well-being.