This MCQ module is based on: Measuring Economic Activity (GDP) and Historical Shifts
Measuring Economic Activity (GDP) and Historical Shifts
Study Notes and Summary
Chapter Notes:
Comparing the Three Sectors: Sectors produce a large number of goods and services and employ many people. An economy may have dominant sectors in terms of total production and employment.
Gross Domestic Product (GDP):
Economists suggest using the value of goods and services for calculation, rather than counting actual numbers, to avoid impossible tasks and meaningless additions.
Final Goods and Services: Only final goods and services are counted in GDP.
Intermediate Goods: Goods used up in producing final goods and services are not counted separately to avoid double-counting (e.g., wheat and flour are intermediate goods for biscuits). The value of final goods already includes intermediate goods.
Definition: GDP is the value of all final goods and services produced within a country during a particular year. It indicates the size of an economy.
Measurement in India: The central government ministry undertakes the task of measuring GDP with the help of various government departments in states and union territories, collecting information on volume and prices of goods and services.
Historical Change in Sectors:
Initial Stages of Development: Primary sector was the most important sector for economic activity in many now-developed countries.
Shift to Secondary Sector: Over time (more than a hundred years), with the introduction of new manufacturing methods and the expansion of factories, the secondary (industrial) sector gradually became the most important in total production and employment. People shifted from farms to factories.
Shift to Tertiary Sector (Developed Countries): In the past 100 years, developed countries experienced a further shift from the secondary to the tertiary (service) sector, which became the most important in terms of total production and employment.
Primary, Secondary, and Tertiary Sectors in India:
Rising Importance of Tertiary Sector in Production: Between 1973-74 and 2013-14, production increased in all three sectors, but most significantly in the tertiary sector. By 2013-14, the tertiary sector emerged as the largest producing sector in India, replacing the primary sector.
Reasons for Tertiary Sector Growth:
Basic Services: Requirement for essential services like hospitals, educational institutions, post services, police, courts, defense, transport, banking, and insurance, which governments in developing countries must provide.
Development of Primary and Secondary Sectors: Leads to increased demand for services like transport, trade, and storage.
Rise in Income Levels: Higher incomes lead to increased demand for services like eating out, tourism, shopping, private healthcare, and professional training, especially in cities.
Information and Communication Technology (ICT): New services based on ICT have become important and essential, with their production rising rapidly.
Unequal Growth within Tertiary Sector: Not all parts of the service sector are growing equally well; a limited number employ highly skilled workers, while many workers in other services (small shopkeepers, repair persons) barely earn a living due to lack of alternative opportunities.
Practice MCQs
Assessment Worksheets
This assessment will be based on: Measuring Economic Activity (GDP) and Historical Shifts
Olympiad Focus & Application
Real-Life Connections & General Knowledge:
Understanding the economic significance of the rapid growth of the service sector in India, seen through everyday examples like call centers, IT companies, and growing tourism.
How governmental initiatives and economic policies contribute to the growth of different sectors.
Case-based Scenarios & Reasoning:
Scenario: A country experiences a boom in its manufacturing sector. Analyze the potential positive impacts on its GDP and the demand for tertiary sector services.
Scenario: Explain why counting only the final value of a car produced is essential for accurate GDP calculation, rather than adding the value of steel, tires, and other components separately.
Conceptual Application:
Discuss the “structural transformation” of an economy, where the dominance of sectors shifts from primary to secondary to tertiary as a country develops.
Explain the concept of “value added” at each stage of production and its relevance to GDP calculation.
Numerical/Data Interpretation:
Graph 1: GDP by Primary, Secondary and Tertiary Sectors (1973-74 vs. 2013-14)
Visually demonstrates the shift in the largest producing sector from primary (1973-74) to tertiary (2013-14) in India.
Allows for analysis of the growth of each sector over four decades.
Graph 2: Share of Sectors in GDP (%) (1973-74 vs. 2013-14)
Shows the percentage contribution of each sector to GDP.
Highlights the dramatic increase in the tertiary sector’s share and the decrease in the primary sector’s share.
Comparative & Analytical Points:
Compare the historical economic development patterns of developed countries with India, specifically the shift in sectoral importance for production.
Analyze the discrepancy between the rising share of the tertiary sector in GDP and its limited capacity to create widespread employment, particularly for less skilled workers.
