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Topic 2 - Macro > 2.1.1 Economic Growth > Flashcards

2.1.1 Economic Growth Flashcards

1
Q

What is GDP

A

Measures the total value of national output of goods and services produced in a given time period

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2
Q

Which are the three ways you can calculate GDP

A

Output

Expenditure (aggregated Demand)

National Incomes

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3
Q

List the 5 main expenditures that go in to calculate GDP

A

Consumption

Government Spending

Investment

Spending

Change in value of Stocks

Exports ( - imports)

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4
Q

Aggregated demand (GDP) equation

A

AD= C+I+G+X-M

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5
Q

What is the circular flow of income

A

a model that shows the operation of an economy

This shows the flow of income and goods/services between different components of an economy

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6
Q

What are injections into the economy

A

Investments

Government Spending

Exports

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7
Q

What are leakages in the economy

A

Saving

Taxtion

Import

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8
Q

Factors that effect income

A

comes from wages and salaries

profits of private/public sector businesses

Rental income from land ownership

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9
Q

4 main economic sectors

A

primary - farming construction manufacturing tertiary - tourism quaternary - business consultancy

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10
Q

GDP can be analysed in terms of …………. produced by different industries and the ……….. of goods/services made by consumers

A

value of output expenditure

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11
Q

What happens to the value added in market value of goods/services during each stage of production or supply

A

value added increases

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12
Q

equation for value added

A

value of production - value of intermediate inputs used in supplying a good

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13
Q

Examples of Lower value Added industries

A

Textile Mass

processed foods

Farming

Manufacturing assembly

Social Care

Contract Cleaning

Services

Security

Businesses

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14
Q

Examples of Higher Value Added Industries

A

Information Technology

Renewable energy

Precision Engineering

Life Sciences

Aerospace

Bio-Technology

High class restaurant + Hotels

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15
Q

What is the Manufacturing industries And in what year did it contribute to x% of UK GDP and y% of all jobs

A

is a process of business of producing goods in factories year: 2018 x: 10% y: 8%

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16
Q

What is the service sector And in what year did service sector jobs account for x% of UK output and y% of jobs

A

part of the tertiary sector, examples include: accountancy, health care, education and tourism year: 2018 x: 80% y=83%

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17
Q

What is short run economic growth and how is it measured

A

increase in real value of goods and services produced and is measured by annual % change of GDP

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18
Q

Long run economic growth

A

an increase in a countries productive capacity/ potential output

19
Q

Nominal GDP

A

is the monetary value of national output of good/services measured at current prices

20
Q

Real GDP

A

Involves taking into account inflation, where money GDP is adjusted for changes in price level

21
Q

What was nominal GDP in the UK in 2018

A

£2118 billon

22
Q

Real GDP per Capita

A

real income per head of population expressed at constant prices

23
Q

Real disposable income

A

income after deduction of taxes + benefits, adjusted for the effect of inflation

24
Q

Gross national Income And what can it be used for

A

is GDP plus net property income from overseas It is used when calculating the income component of HDI

25
Q

What is Purchasing Power Parity

A

a measure of how many units of one countries currency are needed to buy the same basket of goods/ services as can be bought with a given amount of another currency

26
Q

Name a country where the relative cost of living is high

A

Norway Switzerland

27
Q

Why is PPP useful when looking at GDP per capita (or GNI)

A

it gives us a better idea of living standards than simply GDP (GNI) per capita alone as a person with the in a LIC will be able to buy more goods/services.

28
Q

How do you work out real GDP

A

Nominal GDP x 100/price index in that year

29
Q

What is the main indictor for standard of living

A

real GDI per capita expressed at purchasing power parity

30
Q

Key benefits of using real GDP when assessing changes in living standards

A
  • easy to make comparisons over time
  • Easy to compare to other countries
  • It correlates with other measures of standards of living
  • Having income generally correlates with being able to buy more goods and services
31
Q

Why can GDP be inaccurate

A
  • understate real national income per capita due to shadow economy and unpaid work done by volunteers
  • shadow economy includes illegal activities, and tax evasions
32
Q

4 Limitations to GDP

A
  • no allowance for environmental cost such as pollution
  • Human happiness determined by many factors other things than physical goods/services
  • not measure sustainability of growth, a temporarily high GDP by over-exploiting/allocating resources
  • Balance of GDP - some contries large amounts of GDP spent of arms at expense of health
33
Q

6 Strategies for improving living standards

A
  • Improving Human Capital
  • Getting people into properly paid work
  • living wage to lift labour productivity
  • accessible + high quality public services
  • better/ affordable housing to rent + buy
  • Wealth from successful businesses
34
Q

UK Government estimates the hidden economy ‘tax gap’ at how much in 15-16

A

£3.5 billon

35
Q

What is economic growth

A

Growth is a sustained growth of GDP over time

Long run increase in countries productivity potential/ capacity

36
Q

What is economic welfare

A

A broader measure of well-being, where social/economic factors considered

37
Q

What 6 indicators does Economic wellbeing take into account

A
  • Real GDP per capita
  • Real household spending per head
  • Median Household Income
  • Household Net Wealth
  • Unemployment rate and employment rate
  • Financial situations of households
38
Q

What are the 4 factor that are taken into account in gross national happiness

A
  • sustainable + equitable socio-economic growth
  • environmental conservation
  • Preservation + promotion of national culture
  • Good governance
39
Q

In 2019 the UN published a World Happiness report, which where the top three countries

A
  • Finland (for two years in a row)
  • Denmark
  • Luxembourg
40
Q

Why is median income a better than mean income

A

because mean can easily be effected by outliers i.e. small number of very rich households can pull up mean

41
Q

In April 2018 median gross weekly earnings for full-time employees in the UK was up by what percent

42
Q

What is Easterlin Paradox

A

concerns whether we are more happier and more more contented as our real living standard improves

life satisfaction does rise with average income however to a point .

Beyond that the marginal gain of happiness declines

Topic 2 - Macro (23 decks)

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