2.1 Flashcards
What occurs when there is a rise in the value of Gross Domestic Product (GDP)?
Economic growth
Economic growth indicates an increase in national output.
What does GDP measure?
The quantity of goods and services produced in an economy
GDP reflects the overall economic activity within a country.
What is the relationship between economic growth and living standards?
Economic growth leads to higher living standards and more employment opportunities
Increased GDP typically correlates with improved quality of life.
What is real GDP?
The value of GDP adjusted for inflation
Real GDP provides a more accurate representation of economic growth over time.
If the economy grew by 4% and inflation was 2%, what is the real economic growth?
2%
Real economic growth is calculated by subtracting inflation from nominal growth.
What is nominal GDP?
The value of GDP without being adjusted for inflation
Nominal GDP can give a misleading impression of economic growth.
What is total GDP?
The combined monetary value of all goods and services produced within a country’s borders during a specific time period
Total GDP reflects the overall economic output of a country.
How is GDP per capita calculated?
Total GDP divided by the population of the country
GDP per capita measures the average output per person.
What does the volume of GDP refer to?
GDP adjusted for inflation
It reflects the real level of economic output.
What is the value of GDP?
The monetary value of GDP at prices of the day
It is calculated by multiplying volume by current price level.
What is Gross National Product (GNP)?
The market value of all products produced annually by the labor and property supplied by the citizens of one country
GNP includes GDP plus income earned from overseas assets.
What does Gross National Income (GNI) include?
Value added by all producers residing in a nation, net overseas interest payments, and dividends
GNI accounts for international income flows.
What is Purchasing Power Parity (PPP)?
A theory that estimates the necessary adjustment of exchange rates for equivalent purchasing power
PPP is used to compare economic productivity and standards of living between countries.
What is purchasing power?
The value of a currency in terms of the amount of goods or services that can be purchased with it.
How can purchasing power be illustrated with an example?
If a car costs £15,000 in the UK and the exchange rate is 1.5 f per $, it should cost $10,000 in the US.
What is a limitation of using GDP to compare living standards between countries?
GDP does not indicate the distribution of income within a country.
Why might GDP comparisons be misleading?
Large hidden economies, such as the black market, are not accounted for in GDP.
What does GDP fail to indicate regarding welfare?
GDP gives no indication of welfare or overall well-being in a country.
What alternative measures can be used to compare living standards?
Measures such as the happiness index may be used alongside GDP.
What are the six factors affecting national well-being according to the UN happiness report?
- Real GDP per capita
- Health
- Life expectancy
- Having someone to count on
- Perceived freedom to make life choices
- Freedom from corruption
- Generosity
What does the UK ‘Measuring National Wellbeing’ report include?
Questions about life satisfaction, anxiety, happiness, and worthwhileness.
What was the GDP growth in the UK between 2007 and 2014?
The UK economy grew by 5% in GDP per capita.
What relationship exists between real incomes and subjective happiness?
Higher GDP per capita generally correlates with higher average life satisfaction scores.
True or False: Higher income always leads to increased happiness.
False
