2.1.1 Economic Growth

Question 1

What is economic growth?

Answer 1

A rise in the value of GDP. It leads to higher living standards and more employment oppurtunities.

Question 2

What is Real GDP

Answer 2

The value of GDP adjusted for inflation.

Question 3

What is nomial GDP

Answer 3

GDP without being adjusted for inflation - can be misleading as it can appear higher than it actually is.

Question 4

What are PPPs

Answer 4

Purchasing Power Parity
Estimates how much the exchange rate needs adjusting so that an exchange between countries is equivalent using each currency’s purchasing power.

Question 5

What is national happiness

Answer 5

A wider way of measuring the standard of living in the UK. It shows the relationship between real incomes and subjective happiness.

Question 5

GNP vs GNI

Answer 5

GNP is the value of goods and services produced by a country within AND outside its borders (i.e inc. TNCs).

GNI is the earnings domestically and overseas that is sent back home.

Question 5

What are the limitations of using GDP to compare living standards.

Answer 5

• No indication of distribution
• Hidden economies like the Black Market are not incorporated.
• No indication of welfare - I.E happiness, enviromental degradtion.