2.1.1- Economic Growth

Question 1

What is economic growth?

Answer 1

The rate of change of output

Question 2

What is gross domestic product?

Answer 2

The total value of goods and services produced in a country within a year

Question 3

What are real values?

Answer 3

The volume of national income, adjusted for inflation

Question 4

What are nominal values?

Answer 4

The value of national income, not adjusted for inflation

Question 5

Why is economic growth valuable?

Answer 5

-consumer confidence
-more money circulating
-reduced poverty
-improved gov’t finances
-higher incomes

Question 6

What is gross national product?

Answer 6

The value of goods and services over a period of time through labour or property supplied by citizens of a country both domestically or overseas

Question 7

What is purchasing power parities?

Answer 7

An exchange rate of one currency for another which compares how much a typical basket of goods in the country costs compared to one in another country

Question 8

What are the problems of using GDP?

Answer 8

-inaccuracy of data
-inequalities
-quality of goods and services
-comparing different currencies
-spending

Question 9

Why is inaccurate data a problem of using GDP?

Answer 9

-hidden money to avoid tax
-doesn’t take into account home produced services

Question 10

Why are inequalities a problem of using GDP?

Answer 10

an increase in GDP may be due to a growth of income in just one group of people so many not increase the living standards everywhere

Question 11

Why is the quality of goods and services a problem of using GDP?

Answer 11

-quality is higher than 50 years ago but that isn’t reflected in the real price of goods
-improved technology may allow prices to fall without a falling life standard

Question 12

Why is comparing different currencies a problem of using GDP?

Answer 12

-usually converted into US dollars
-PPP should be used

Question 13

Why is spending a problem of using GDP?

Answer 13

Some types of expenditure doesn’t increasing living standards but will increase GDP

Question 14

What are the national happiness factors?

Answer 14

1. Real gdp per capita
2. Health
3. Life expectancy
4. Having someone to count on
5. Perceived freedom to make life choices
6. Freedom from corruption
7. Generosity

Question 15

What is national wellbeing affected by?

Answer 15

Relationship status, employment status, life satisfaction, anxiety, and happiness

Question 16

What is the Easterlin Paradox?

Answer 16

An increase in consumption of material goods will increase happiness if basic needs aren’t met, however, as income increases further, happiness doesn’t increase

Question 17

What is the big max index?

Answer 17

What a currency is worth in terms of buying goods and services like a Big Mac

Question 18

Why do countries’ Big Macs cost differently?

Answer 18

1. Differences in per capita income
2. Variations in supply costs
3. Exchange rates
4. Differences in taxation
5. Different levels of completion
6. Impact of import tariffs