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Theme 2 > 2.1.1 Economic Growth > Flashcards

2.1.1 Economic Growth Flashcards

1
Q

What is GDP?

A

Gross Domestic Product - the final market value of all goods and services produced within a year

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2
Q

What political and economic event in 2008 caused GDP to fall?

A

The Financial Crisis

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3
Q

What is economic growth?

A

The rate of change of economic output usually measured by changes in real GDP

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4
Q

A recession is defined as what?

A

Two quarters of negative economic growth

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5
Q

What is real GDP?

A

The value of all goods and services in an economy adjusted for changes in the price level

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6
Q

What is nominal GDP?

A

The value of all goods and services in an economy expressed in the current price level

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7
Q

What does GDP per capita mean?

A

GDP / population

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8
Q

What is a slump?

A

Historically low GDP

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9
Q

What is a boom?

A

Historically high GDP

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10
Q

What are the 4 limitations to using GDP to compare countries?

A
  • no common currency
  • accounting techniques vary
  • price level changes
  • climate can effect figures
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11
Q

What is GNI?

A

Gross National Income - GDP, plus income from other countries

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12
Q

What is GNP?

A

Gross National Product - GDP plus income from other countries, minus income claimed by non residents

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13
Q

What is potential economic growth?

A

An expansion in the productive capacity of an economy

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14
Q

What is a actual economic growth?

A

The rate of growth of real GDP

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15
Q

Why are actual economic growth and potential economic growth different things?

A

Because the economy isn’t always operating at full capacity

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16
Q

What is the rate/business cycle?

A

Where GDP fluctuates around an underlying trend

17
Q

How do different accounting techniques make comparing economic growth challenging?

A

Countries have an informal sector, that differs from country to country. Some transactions go unrecorded in some countries, whereas they don’t in others

18
Q

What is purchasing power parity (PPP)?

A

An exchange rate adjusted to reflect the relative purchasing power of incomes in different countries

19
Q

How does a difference in exchange rates make comparing economic growth difficult?

A

Different currencies and incomes have different purchasing power parities meaning they buy a different amount of good in different countries

20
Q

What is the Easterlin paradox?

A

The idea that happiness increases in relation to wealth and income, however only up to a pooint

21
Q

Name 3 factors that affect national wellbeing?

A
  • family relationships
  • financial situation
  • health
22
Q

Define productivity?

A

The output per unit of good

23
Q

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

A
  • difference in exchange rates
  • the size of the informal economy (accounting methods vary)
  • a growth in GDP can reflect a growth in wages for the highest earners, not everyone // GDP per capita
24
Q

What 4 things cause economic growth?

A
  • improvements in technology
  • lowering cost of raw materials, or discovering new ones
  • increase in labour force
  • rise in government spending
25
Q

What are the 4 advantages to economic growth?

A
  • lower unemployment
  • higher average incomes
  • innovation
  • improved balance of payments
26
Q

What are the 5 costs to economic growth?

A
  • inflation
  • trade deficit
  • negative externalities
  • inequality
  • economic problem
27
Q

Explain the problem with GDP? (inequalities)

A

Income distribution changes over time, may only be a rise in the extreme rich that causes a rise in rGDP. Also takes into account MNCs profit, which may be sent abroad

28
Q

Explain the problem with GDP? (quality)

A

rGDP is simply the market value of all goods and services produced in the economy. So does not directly mean a rise in living standards. For example, technology means the price of goods has fallen indicating a fall in GDP as market value would fall, however living standards would rise.

29
Q

Explain the problem with GDP? (spending)

A

Spending of defence, for example, increases AD but does not reflect an increase in living standards

30
Q

Explain how GDP could be flawed?

A

Economic growth can be measured in other ways, education, happiness, living standards e.c.t.

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