2.1.1 Economic growth Flashcards
What is GDP
Gross domestic product is the value of all goods and services produced in a country over a period of time
Measured in income, expenditure and output
Whats the difference between short and long run economic growth
LR is the increase in productive capacity of an economy over a period of time
SR is an increase in the real value of goods and services produced, measured by changes in the real GDP
What are demand side shocks
Fluctuations in growth due to effects on demand
e.g increasing interest rates, stock market crashes, world economy affecting exports
What are supply side shocks
Fluctuations in growth due to effects on supply
e.g trade union power, commodity prices
What is the trend rate of economic growth
how fast the economy can reasonably be expected to grow without creating an increase in inflationary pressures
What is nominal GDP
The monetary value of the national output of g/s at current prices
What is real GDP
Nominal GDP adjusted to take inflation into account, volume measurement
What is GDP/capita
GDP taking into account population
What is GNI
GDP plus net external factors
What are purchasing power parities
Used for international comparisons of prices, uses exchange rates adjusted to costs of livings in different countries
What are the benefits to using GDP/GNI to compare living standards
-tells us about accsess to g/s
-data readily available
-widely used and understood
-quick way to compare
-quantitative and objective
What are the problems with using GDP/GNI to compare living standards
-doesn’t take into account quality of life
-doesn’t include unpaid or unofficial work
-doesn’t include g/s consumed by producers
-increases in GDP may not be shared equally across population
-masks inequalities
-may be more pollution, stress, congestion etc making standards of living worse despite increased income
Why measure national happiness
ONS measures national well-being which measures standard of living, due to the debate about the ‘Easterlin paradox’ that happiness rises with incomes up to a point, beyond this happiness falls because people care about relative as well as incomes.
