2.1.1: Economic Growth Flashcards
What is GDP?
The value of goods & services produced in an economy over a period of time.
It is an indicator of the standard of living in a country.
What is short-run economic growth?
The ACTUAL percentage change in real national output (Nominal N.O./Average Price Level)
OR
percentage change in Gross Domestic Product (GDP).
What is long-run economic growth?
Increase in the POTENTIAL productive capacity of the economy (can be shown on an outward shift of the PPF).
What is real GDP?
The value of GDP, taking inflation into account.
What is nominal GDP?
The value of GDP, taking no account of inflation.
What is the price index formulae?
Nominal GDP/Real GDP X 100 = Price Index
What is the real GDP formulae?
Nominal GDP/Price Index X 100 = Real GDP
What is total GDP?
The overall GDP for a country.
What is GDP per capita?
Total GDP divided by population.
When does GDP per capita grow?
GDP per capita grows if national output grows faster than population.
What is value?
What goods/services are worth.
What is volume?
The number of goods/services produced.
What is the volume formulae?
Volume = Value/Price.
What is Gross National Income (GNI)?
GDP + Abroad Net Income (adds on what a country earns from overseas investments).
What is Gross National Product (GNP)?
Value of all goods/services produced by domestic businesses and property (home and abroad).
How are comparisons of rate of growth made over time?
-The data is compared with other countries to give context.
-The figures can help make judgements about economic welfare (as national income growth means a rise in living standards).
-Real & per capita figures are used.
How are comparisons of rate of growth made between countries?
-Real & per capita figures are used.
What are purchasing power parities (PPP’s)?
Exchange rate that compares the cost of living in different countries through comparing a typical basket of goods.
What is an example of purchasing power parities (PPP’s)?
£10 in the UK will buy you one meal.
£10 (converted to 600 Rupees) in India will buy you four meals.
What are limitations of GDP for living standards?
-GDP doesn’t take home-produced goods/services into account (e.g. farmers).
-GDP is underestimated due to the use of ‘hidden’ and ‘black’ markets.
-Externalities (higher economic growth is linked to increased pollution).
-Doesn’t account for inequality.
What are limitations of GDP for comparison with other countries?
-Inequality (an increase in GDP may be due to a growth in income of just one group of people, therefore a growth in the national income may not increase living standards everywhere).
-Some countries are inefficient at collecting data, making comparisons less effective.
-Some types of expenditure (e.g. defence) may increase GDP without increasing living standards.
What are the 6 criteria for National Happiness (according to the UN)?
-Real GDP and capita.
-Healthy life expectancy.
-Having someone to count on.
-Perceived freedom to make life choices.
-Freedom from corruption.
-Generosity.
What is the Easterlin Paradox (graph)?
[HAPPINESS AND INCOME AT OPPOSITE AXES]
What is the difference between real GDP and nominal GDP?
Real GDP takes inflation into account, whereas nominal GDP does not.
What is the difference between total GDP and GDP per capita?
Total GDP is the overall GDP of a country, whereas per capita GDP is the overall GDP of a country divided by its population.
