2. Measuring Macroeconomic Performance - Macro Indicators Flashcards
Why are measures of economic growth useful to the government?
They allow the government to see how the economy is doing currently also how affective previous policies have been and how affective future policies are likely to be.It allows them to forecast growth. Allows comparisons with other economies
What are the 4 different measures of economic growth?
Real GDP - adjusted for inflation GDP/capita GNI/capita Green GDP
What is GDP?
The final value of all goods and services produced in economy.
How can GDP be used as a measure of economic growth?
GDP shows the economies total expenditure = total income = total output as incomes go up standard of living go up.
What are the evaluations for using GDP as a measure of growth?
May be unreliable statistics due to double countingDoesn’t include informal/illegal activity - still part of GDP but not includedLikely to have mistakes due to the quantity of info neededDoesn’t take into account the negative externalities of a high GDP and income equality is that arise from it.
How can GDP/capita be used as a measure of economic growth?
Gives an average measure of individual real incomes in the economy.
What are the evaluations of using GDP per capita as a measure of economic growth and standards of living?
Doesn’t take into account factor income earned abroad - even if sent home as remittances Influence of FDI - may distort figures - repatriation of profit - FDI income often sent back homeDoesn’t take into account the negative externalities from high GDP like pollution affecting health
What is GNI?
The total income generated by a countries FoP’s regardless of where those FoP’s are located. GNI=GDP+Net Factor income
What are the evaluation points the GNI as a measure of economic growth and living standards?
Doesn’t get affected by FDI and repatriation of profits.It’s more likely to account for remittances.It still doesn’t take into account environmental impacts and effects this has on the standard of living.
What is green GDP?
It is GDP adjusted for the environmental costs of activity by the economy.GDP - environmental costs
What are the evaluation points for the use of green GDP as a measure of economic growth and living standards?
Is very difficult to find the monetary value of the environmental costs.May be political issues as countries choose not to use green GDP in order to mask the environmental issues they have. But it does count for environmental issues affecting living standards more than any of the other methods.
