2.1.1 - economic growth Flashcards
Define short run growth
The actual annual percentage change in real national output
Define long term growth
An increase in the potential productive capacity of the economy
Define Gross domestic product
The total value of goods and services produced in the economy over a period of time
Define Real Gross domestic product
The total value of goods and services produced in the economy over a period of time taking into account inflation
How calculate GNI
gdp + net income from abroad
Why are GNI and GNP bad to use as comparators for countries
many people in LIC work informal jobs, having no financial record of their work.
What are the limitations of using GDP to compare living standards
3 is enough
The shadow economy is not included in measurements
The negative externalities e.g. pollution that economic growth can cause are not taken into account
Economic growth can cause inequalities in income and wealth within a country
what are the Problems of comparison between developed and developing countries
x3
Developing countries often consume what they produce and don’t offer it for sale on the market. Therefore, it has no monetary value
Developed countries often increase incomes at the expense of quality of life. For example stress, long working hours and congestion when travelling
Developing countries might wish to achieve growth at the expense of health and safety
What are the 5 ways to measure economic growth
GDP
GDP PER CAPITA
REAL GDP
PPP - PURCHASING POWER PARITY
GROSS NATIONAL INCOME
what does living standards refer to
The quantity or quality of material goods and services available to given population.
explain one reason why purchasing power parities are used, 2 marks.
To improve the accuracy when comparing data between countries.
By comparing the price of a basket of comparable goods and services in different countries.
how do you calculate index number
take the base year to be 100
then calculate the % increase for another year.
add this % increase to 100 and get your index number
define the term index number
Shows % change in price or quantity from base year.
explain one characteristic of a recession - 2 marks
falling inflation, due to reduction in consumer expenditure
define the term purchasing power parities - 2 marks
comparison between countries, taking into account different cost of living.
