hello there geographers and welcome back to the Mr sin Channel today we are going to talk about different ways in which we can measure development as always if you find Value in these videos consider subscribing to start let's review the difference between the formal economy and the informal economy the formal economy consists of economic activities that are recognized by law and are overseen by the government jobs and activities in the formal economy have set rules legal protections and are taxed by the government they also have access to traditional financial services such as Bank a couple examples of jobs in the formal economy would be doctors servers or teachers just to name a few while on the other hand the informal economy consists of economic activities and jobs that are not regulated or protected by the government jobs and activities in the informal economy often do not have access to formal Financial Services they lack consistent income and often do not have regulations or legal protection jobs such as Street vendors domestic work illegal businesses or unregistered small businesses would all be be examples of jobs in the informal economy traditionally we can see that countries that have less economic development generally have a significant amount of jobs and activities located in the informal economy instead of the formal economy now since the informal economy is not regulated or overseen by the government it can be difficult to measure however we can measure the formal economy in a variety of different ways the first measure we can use is the GDP which stands for gross domestic product this measures the total economic output of a country over a given period of time we can get a country's GDP by adding a country's consumption investment government spending and the country's exports minus its import notice that we are subtracting imports from our calculation this is because the GDP is only factoring in production that occurs inside the country's boundaries when GDP is increasing it shows that businesses are expanding jobs are being created and the economy is growing we can also see that when the GDP has increased seen it indicates that there is more consumer and government spending which is due to the government receiving more tax revenue and consumers having more disposable income but on the other hand when GDP is declining it shows that the total value of goods and services inside the country's boundaries is shrinking which can be due to the result of an economic contraction or possibly a recession a decrease in the GDP also often indicates that businesses may be struggling that jobs are being lost and that consumers are spending less money another way in which we can observe economic development is by looking at the GNP which stands for the gross national product the GMP includes the value of all goods and services produced by a country's citizen regardless of where they are located in the world both the GMP and GDP are pretty similar however the key difference is the GMP factors in both domestic production and the production of a country citizens who are living abroad remember the GMP is only looking at the production of goods and services by the nationality of the country so any foreign production inside the country's boundaries would not count for the GMP if a country's GMP is larger than its GDP it can mean a couple of different things it could be that there is a significant amount of citizens living abroad and no longer living inside the country's boundary or it could also mean that there is a lot of foreign investment and production happening inside the country's boundary to better illustrate these two concepts think of it this way if Toyota builds a factory in the United States to produce cars in the country that is part of the United States as GDP since production is happening domestically in the United States however Toyota is not a us-based company so this production would not be part of the United States as GMP and instead would be part of Japan's GNP since Toyota is a Japanese company or take Starbucks for example when they open a new store inside the United States it is part of the United States as GDP and its GNP since Starbucks is an American company but if Starbucks opens stores in in China those stores would be part of China's GDP and not the United States as GDP since the production is occurring inside China's boundaries but remember Starbucks is still an American company so it would be part of the United States as GNP and not China up next we have the gni which stands for gross national income to calculate the gni you need to add up the income generated by all of the country's citizens regardless of where they're located in the world this would include wages profits and also investment notice here the focus is on income not production for example Tesla is an american-based company but as factories in countries around the world and earns profits from the sale of goods produced in those factories if we were looking at the GDP of the United States we would only factor in the production of the Tesla sales inside the United States's boundary but when looking at the gni we would also include the profit from factories in other countries now you might be thinking how does this differ from a country's GMP and to be fair it's a great question the main difference between the gni and the GMP is the gni focuses on income generated by a country's citizens and company while the GMP focuses on production we can also look at the gni per capita which is often used as a way to better understand a country's standard of living to find the gni per capita we have to take a country's gni and divide it by its population remember the gni includes the total income earned by a country's citizen this includes all wages profits and Investments both by individuals and businesses so the gni per capita allows us to gain an estimate that shows us the average income earned by each person in the country generally the higher the gni per capita the more economic opportunities there are in society along with the more goods and services that people have access to and the higher the standard of living is one thing to note is that the gni per capita does not factor in things such as income inequality quality of life or other social aspects so it does not show an entire picture of a country now so far we've been looking at ways in which we can measure economic development of a country but we can also measure a country's Social Development as well one way we can do this is by looking at a country's gii which is the gender inequality Index this index shows inequality between women and men in three different areas reproductive Health empowerment and the labor market reproductive health is measured by the maternal mortality ratio and the Adolescent fertility rate empowerment is measured by the amount of government positions held by each gender and the amount of secondary and higher education levels obtained by each gender lastly the labor market is measured by women's participation in the workforce a country's gii can range between zero and one with the higher values indicating more inequalities and disparities between women and men if the gii for a country is ever zero it would mean there is no inequalities in society and the country has perfect equality currently however there are no countries in the world with a score of zero notice that generally we can see that countries that have more Economic Development are are more likely to have a lower GI while countries that have less economic development generally have a higher gii here we can also connect back to our unit too where we looked at countries demographic data and analyze the impact that Economic Development has on a country's TFR IMR literacy rates access to medicine and population growth remember countries that are not far along in the demographic transition model tend to have a high natural increase rate higher infant mortality rate and higher total fertility rate they also are more likely to give women less economic and social opportunities in society and have traditional gender roles in place another last indicator we are going to look at is the HDI which stands for the human development index this index is determined by looking at a country's life expectancy expected years of schooling and the gross national income per capita just like the gii the HDI can range anywhere from zero to one however unlike the gii the higher the score the higher the human development understanding the HDI allows us to gain different insights into different countries and compare the level of human development between them we can also use the HDI to track a country's development over time to see how a country is developing and identify different areas in which further Improvement could occur today the countries with the highest HDI would be Switzerland Norway Iceland Hong Kong and Australia just to name a few one other way in which we can measure development would be to look at the amount of renewable resources and the use of fossil fuel as countries become more developed they tend to rely more on fossil fuels to meet their new growing energy demand developed countries are more often more dependent on fossil fuels due to their dependency on cars planes and other technological advances today though we are also seeing higher levels of renewable energy be utilized to help provide energy needs for society however once again it's most commonly found in more developed countries that have access to Capital by understanding these different social and economic indicators and measurements we can better understand life in society and the different economic and social opportunities that exist within a state but now comes the time to practice what we've learned answer the questions on the screen and when you're done check your answers in the description and comment section down below as always if you found value in this video consider subscribing and check out my ultimate review packet for more help with your AP Human Geography studies it's a great resource that will help you get an A in your class and a five on that National exam as always I'm Mr sin thank you so much for watching and I'll see you next time online