2.1.1

Question 1

Why is GDP considered a poor method of measuring welfare?

Answer 1

GDP only measures the financial and economic aspects of welfare. But not the other aspects which make up welfare such as health and education. This can mean that GDP will give inaccurate values and can lead to economists making the wrong decisions.

Question 2

What other methods can economists use to measure other aspects of welfare, better than GDP?

Answer 2

Economists can use other methods such as GNI and GNP to look at welfare at a closer level than GDP. But, in terms of taking aspects of welfare such as health and education into account. They can use the ONS which is a survey of the levels of happiness of citizens in the country. This can give more accurate values for welfare and can help them make more informed and beneficial decisions on increasing welfare levels.

Question 3

What is the difference between nominal and real values?

Answer 3

Nominal - Expressed in monetary terms does not take inflation into account.
Real - Takes inflation into account.

Question 4

How do you calculate real national output?

Answer 4

Nominal national output/Average price level X 100

Question 5

Total national income

Answer 5

Value of all goods and services produced in a country.

Question 6

Per capita income

Answer 6

Total income divided by the number of people in the country.

Question 7

Gross national product (GNP)

Answer 7

The value of all goods and services produced by domestic businesses and property at home and abroad

Question 8

GNI Gross national income

Answer 8

The total level of income of a country. This includes net income earned abroad from dividends and interest payments.