2.1 Measures Of Economic Performance Flashcards
What are the 4 indicators of economic performance?
- Economic growth
- Unemployment
- Inflation
- Current account
What does economic growth refer to?
- The rate of change in GDP between terms
- GDP is ‘gross domestic product’ and is a measure of the total goods and services produced in a country
What does unemployment refer to?
- Number of people who are actively looking for a job but are currently without one
What does inflation refer to?
- A sustained increase in general price level
- Leads to a fall in the purchasing power of a currency
What does current account refer to?
- Difference in the value of the total exports (X)- total imports (M)
What is GDP?
- Gross Domestic Product
- Measures total value of national output of goods and services produced in a given time period
- Within geographical boundaries of country
What are the three main types of GDP calculations?
- Expenditure
- Incomes
- Output value
What factors make up expenditure in GDP?
- Consumption (C)
- Government spending (G)
- Investment spending (I)
- Changes in value of stocks
- Exports (X)
- (negative) Imports (M)
What factors make up income in GDP?
- Wages & Salaries
- Profits of businesses
- Rental income from land ownership
What factors make up output value in GDP?
- These are the value added from each of the main sectors including:
- Primary (extraction)
- Secondary (manufacturing)
- Tertiary (services)
- Quaternary (research)
What is value GDP vs volume GDP?
- Value GDP is monetary value of goods and services
- Volume GDP is the physical quantity of goods and services
What is nominal GDP?
- Money data is not adjusted for inflation
- GDP is expressed at the current price of money
What is real GDP?
GDP is adjusted for inflation, making it easier to compare to other years
- Prices are held at chosen base year
- =nominal value/price index X 100
- Price index = 100 + inflation
What is GDP per capita?
- Total GDP/population
- Used to find economic output per person in a country
- Useful for finding out average income level per person in a country
What are some limitations to GDP?
- Ignores distribution of wealth
- Doesn’t consider changes in working conditions
- Doesn’t include voluntary work
-Doesn’t measure well-being
What is economic well-being?
- Quality of life and satisfaction
What is economic growth?
- Sustained growth of real GDP over time
- Increases productivity in the long-run
What is economic welfare?
- Measure of social & economic well-being
- Many aspects of this are not material
How might well-being of a country be measured?
- Median household income
- Percentage living below a poverty line
- Life expectancy
- Literacy rates
What is subjective happiness?
- Self-reported levels of happiness, determined through questionnaires
- May be affected by genetics, income, health and social influences
What is the Easterlin Paradox?
- The idea that as average income rises, so does happiness, until a point
- After this point, other factors and changes leads to happiness not further increasing
What is the happy planet index?
- An index that measures a country’s: life expectancy, well-being, inequality outcomes and ecological footprint to determine the countries that have the longest, most happy and most sustainable lives
What is GNI?
- Calculates income of all residents
- = GDP + net primary income + net secondary income
- NPI is wages, salaries and income form a country’s resident abroad and foreign investments
- NSI is transfer of money between families in different countries as well as international aid
What is PPP?
- Purchasing Power Parity is the idea that items should cost the same in different countries, based on the current exchange rate
- It measures how many units of one country’s currency is required to buy the same basket of goods as in another country
What is a PPP-adjusted international comparison?
- A global ranking for countries to show how much it costs for each of them to purchase the same goods
What is national income?
- Total level of output in an economy
- Is equal to national expenditure = national output
What are the 4 factors of production?
- Land
- Labour
- Capital
- Enterprise
What do firms provide to households?
- Goods and services
What do households provide to firms?
- Economic factors of production
What do firms gain from households?
- Expenditure money from consumption of goods and services
What do households gain from firms?
- Money in the form of wages and salaries
What are some injections into the circular flow model?
- Investment
- Government spending
- Exports
What are some leakages (withdrawals) from the circular flow model?
- Savings
- Taxes
- Imports
What does the ‘land’ factor gain?
Rent
What does the ‘capital’ factor gain?
Interest
What does the ‘labour’ factor gain?
Wages
What does the ‘enterprise’ factor gain?
Profits
What is a closed /open economy?
- An economy with/without interaction with foreign agents and economies
What happens if injections>leakages?
- Economic growth occurs
Unless told otherwise, what can we assume of injections and leakages?
- Total injections = total leakages
What is GNI?
Gross national income is the total amount of money earned by a nations people and businesses in a given period
