2.1.1 - economic growth Flashcards
How does the calculation of percentage change in CPI relate to inflation?
The calculation of percentage change in CPI shows the inflation rate.
What are the advantages of using index numbers in economic comparisons?
*Simplifies comparisons of numbers over time
*Removes the effect of differently sized datasets when comparing
What does GDP measure in an economy?
GDP measures the total value of national output of goods and services produced in an economy in a given period of time, at current prices.
Why is GDP per capita useful?
It allows comparison of the economic performance of different countries while considering their population sizes.
Why is real GDP considered a better measure of economic growth than nominal GDP?
Real GDP is better because it shows the change in the actual total value of goods and services produced in a country, after taking inflation into account.
What does GDP per capita measure?
GDP per capita measures the average economic output per person in a country.
What is the GDP price deflator?
The GDP price deflator is a measure of the prices of all final goods and services produced in a given year, relative to the prices of a base year.
What are index numbers used for in economics?
Index numbers are used by economists when making comparisons over time.
What does GDP measure from year to year?
GDP measures the flow of income, expenditure, and production from year to year.
What is a recession in terms of GDP?
A recession occurs when GDP declines for a sustained period, conventionally 6 months, causing a decrease in economic activity (decreases spending, decreases production, jobs and incomes)
What does the Consumer Price Index (CPI) measure?
The Consumer Price Index (CPI) measures the average change in prices over time that consumers pay for a basket of goods and services.
How is economic growth defined?
Economic growth is defined as an increase in the real GDP of an economy in a given period of time.
What does the base value of an index number represent?
The base value always has an index number of 100.
How is real GDP calculated?
nominal GDP/GDP deflator * 100
How is an index number expressed?
The index number is expressed as 100 times the ratio to the base value, index number = (raw number)/(base year raw number)*100
