2. Measures of Economic Growth Flashcards

1
Q

What is GDP?

A

The total value of goods and services produced in a country within a given time period

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2
Q

When does GDP per capita increase?

A

If national output grows faster than population over a given time period.
(There are more goods/services to enjoy per person)

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3
Q

What is a nominal GDP?

A

GDP that refers to current prices, without taking into account inflation or other factors

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4
Q

What is a real GDP?

A

GDP that adjusts according to changes in price

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5
Q

What is GNI?

A

The value of goods and services produced in an economy over a period of time plus net income from abroad

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6
Q

What are 3 sources of external income?

A
  • Remittances
  • Foreign aid
  • Ownership of assets in foreign countries
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7
Q

What are remittances?

A

Funds that migrants send back to their home countries

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8
Q

What is foreign aid?

A

Income from other countries or international organisations that is transferred to a poorer country

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9
Q

What is ownership of foreign assets?

A

Either a government or a domestic company buys an asset overseas

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10
Q

What is the output method?

A

Measures the value of goods and services produced. Each firm calculates the value of its output and reports it

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11
Q

What is the income method?

A

The costs of producing a good are income to different agents. Adds up all sources of income in an economy e.g wages, profit

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12
Q

What is the expenditure method?

A

Adds up the sum of all final goods and services purchased in an economy

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13
Q

What is GNH?

A

An alternative measure for economic growth, focuses on the quality of life in a non monetary sense e.g education

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14
Q

How does economic growth increase happiness?

A
  • More consumption
  • Better education + healthcare
  • Basic needs met
  • More consumer choice
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15
Q

How does economic growth decrease happiness?

A
  • Increased crime
  • Environmental pollution
  • Diminishing income utilty
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16
Q

Name 3 limitations of GDP

A
  1. Fails to record non-market activities: e.g non-market (housework), informal, black market
  2. Fails to account for economic inequality: how growth distributed in economy
  3. Fails to measure negative externalities: undesirable effects from output ignored
17
Q

Formula for real GDP

A

Nominal GDP/GDP deflator x 100

18
Q

What is purchasing power parity?

A

Compares the buying power of different countries currencies via a representative basket of goods