2.1 Measures of economic performance Flashcards
2.1.1 A)
what does GDP measure
the value of all final goods / services produced in an economy
economic growth
2.1.1 A)
methods of measuring GDP value economy
1) expenditure method - consumer expenditure + investment + government + spending + net trade ( export - import)
2) income method - wage + interest + profit + rent
should add to same value
income = output = expenditure
2.1.1 B)
distinction between
real and nomial
Real GDP
- taken inflation into account GDP ^10% , inflation ^6%
= real GDP ^4%
nominal
- value of goods and services in a year within an economy
2.1.1 B)
distinction between
total and per capita
Total GDP
- total value of goods and services in a year within an
economy
per capita
- takes population into account GDP / population used
to compare standard of living
2.1.1 B)
distinction between
value and volume
volume
- adding up the quantity of goods and services in a
year
value
calculating the value of all the goods and services produced in a year
2.1.1 C)
other national income measures
Gross National Income
Gross National Product
2.1.1 C)
what is gni
GDP + income into the countries by other countries interest / dividedness
(for countries w large foreign population who send money back home)
2.1.1 C)
what is gnp
value of goods / services produced by citizen regardless of location
2.1.1 D)
What should we do to compare rates of growth between countries over time
Use gdp [per capita
use real data over normal for fair comparison
2.1.1 E)
What does PPP stand for
and what is it used for
purchasing power parties
helps compare cost of living convert all to dollars
(Check Notes for example)
2.1.1 F)
What is the limitation of using GDP to compare standard of living
-GDP doesn’t include unofficial work / goodwill work
- increased in GDP doesn’t mean its shared equally doesn’t show increase standard of living
- GDP doesn’t take pollution , stress into account
- shadow economy
2.1.1 G)
What is national happiness used for
Used along side economic indicators to get a better idea of standard of living
2.1.1 G)
Key factors of UK national well being
GDP per capita
generosity
trust of absence of corruption
social support
perceived freedom
life expectancy
2.1.1 G)
relationship between real income and subjective happiness
Easterling paradox suggest life satisfactions does rice with income to a point where marginal gain derived from increase in income declines more money is needed for same increase in happiness
2.1.2 A)
What is inflation
Persistent increase in the general price level of prices over a period of time
2.1.2 A)
What is disinflation
falling rate of inflation, avg price ^ but to a slower rate , purchasing power v
2.1.2 A)
What is deflation
average price v, negative infation , prices are cheaper , purchasing power ^
2.1.2 B)
What is inflation rate
change in avg price in an economy in a period of time
2.1.2 B)
How can the UK calculate the rate of inflation
Consumer price index
2.1.2 B)
What are the steps of consumer price index
1) An expenditure survury
2)’consumer basket’ of most popular goods/servies with avg prices
3) prices are weighted based on % of income
4) weighted price are added to give the total weighted price of the basket
5) base year selected its given index value of 100
6)weighted basket converted into index number
7) % change calc done to work out annual inflation rates
8) basket updated annually
2.1.2 B)
index number calc
index number = (raw number / base year raw number) * 100
2.1.2 C)
Limitations of CPI
1) not fully representive for non typical households for example motering costs not appilied to houses w/o a car
2)spending patterns between people w/ w/o kids are diffrent
3) quality change in goods may rise the price not inflation
4) CPI slow to catch up to new products
2.1.2 D)
What is another measure of rate of inflation
rpi
2.1.3 A)
Define unemployment
those who are willing and able to work but cannot find a job despite searching
