2.1 Measures of Economic Performance

Question 1

• What is GDP?
• What does GDP measure?
• What are the 3 ways of calculating GDP?

Answer 1

• Gross Domestic Product:
• measures the market value of all finished goods and services produced in a country
• Expenditure, Income, Output

Question 2

• What are the measurements and objectives of the macroeconomy?

Answer 2

• Measurements/Objectives:
  
  • Economic Growth: strong sustainable economic growth
  • Price level change: price stability (2% target growth yearly)
  • (Un)Employment: Low unemployment and high employment
  • Balance of payments: international payments to be balanced and preferably trade surplus
  • National debt: low national debt
  Year 2 Factors:
  - Environment
  - Inequality
  - Living standards and well being

Question 3

• What are the 2 types of GDP? Define them
• What are 2 examples of countries with high GDP?

Answer 3

• • Real GDP: value of GDP adjusted for inflation
  • Nominal GDP: value of GDP without being adjusted for inflation
• China, USA

Question 4

• Give real life rates of the UK’s (from COVID to present day):
  
  • GDP Growth
  • Inflation rates
  • Unemployment rates
  • Account Balance
  • National Debt

Answer 4

• GDP Growth:
  
  • 20’: sharp decrease
  • 25’ - 1.5% GDP increase (stagnant)
• Inflation rates:
  
  • 20’ to 24’: 2% - 6.5%
  • Peaked at 11%
  • 25’: 2.5%
• (Un)employment:
  
  • 14’ to 20’: 7.5% - 4%
  • 20’: rose to 5%
  • 25’: 4.4%
• Account Balance
  
  • yearly deficit - import-heavy economy
  • £4.7bn deficit
• National Debt
  
  • 19’ to 20’: 85% - 97.5%
  • 20’ onwards: debt to GDP sustained increase to 100%
  • 25’: 97% debt

Question 5

• What are the advantages and disadvantages of GDP?

Answer 5

• Advantages:
  
  • Measured frequently and widely - standardised
  • Easily comparable and accessible
• Disadvantages:
  
  • Hidden economy
  • Distribution of wealth
  • GDP growth = unsustainable if scarce resources are used
  • GDP ignores living conditions

Question 6

• How much of the UK’s economy is under the hidden economy?
• How much of the UK’s distribution of wealth is owned by the Top 1% (compared to the world in 2017)

Answer 6

• £200bn - 10% of GDP
• 2017 UK - Top 1%: 24.3%
  2016: (Top 1% - Total Wealth)
  Gf - Russia: 74.5%
  • India: 58.4%
  • Thailand: 58%