2.1.1 Econ Growth ✅ Flashcards
What is short run?
Actual annual change in % growth in real national output.
Long run econ growth is the increase in potential __ capacity in an economy.
Production
What is GDP?
Gross domestic product - the total value of all goods and services produced in a country in one year. (Measure of growth + living standards)
What two methods are used to calculate GDP?
Total expenditure or total income.
Difference between nominal and real GDP?
Real GDP takes into consideration inflation however nominal does not.
Equation for real GDP?
Nominal GDP/ deflator(inflation part)
What is GDP per capita? What does it do?
Takes into account population. Used to more accurately compare living standards.
Difference between value and volume?
Volume is describing actual amount being produced where value means the value of the actual products.
Name other national income measures?
- Gross national income (GNI)
- gross national product (GNP)
What national income adds foreign investments and subtracts income sent to other countries.
Gross national income.
What national income calculates total product produced regardless of location?
Gross national product.
Name the limit of comparing gni
Some countries don’t have official jobs so there will be inaccuracies.
What is preferred when comparing countries and why? GDP or GDP per head?
GDP per head as it takes into consideration population differences.
What are ppp?
Purchasing power parity.
What do ppps do?
Estimate how much an exchange rate needs to be adjusted relative to purchasing power. Used to compare living standards.
Name limits of using GDP to compare living standards/over time?
- Not include shadow economies.
- Income distribution (doesn’t consider inequality).
- Does not measure quality of life eg education, environment, wellbeing.
What are some problems with comparisons between developed and non developed countries?
- Accuracy of stats.
- Developing countries often consume what they produce not in a market (subsidence farming).
- Developing achieve growth at expense of heath.
- developing increase profit a expense of quality of life.
Who measured wellbeing?
ONS
Label happiness categories?
- Health.
- Relationships.
- Environment.
- Health.
Explain the easterlies paradox. + draw it?
When you are low income and receive more money your happiness increases.
High levels of income receive it money are not associated with increase in happiness.
(Increase consumption of material goods only increase happiness when basic needs are not met.)
What are the benefits of GNI?
Unliked gdp it considers domestic income + income of foreigners in domestic country.
