2.1.1 - Economic Growth - National Income measures

Question 1

Gross Domestic Product (GDP)

Answer 1

Measures the total market value of final goods and services produced in an economy in a given year.

. It is they key measure of national income.

. It is a measurement to see the size and health of an economy over time

Question 2

Economic Growth

Answer 2

.Occurs when there is a rise in the value of GDP.

. A rise in economic growth means there has been an increase in GDP.

. Economic growth leads to higher living standards and more employment

Question 3

Real GDP

Answer 3

The value of GDP adjusted for inflation. E.g. if the economy grew by 4% last year but inflation was 2% , real economic growth was 2%. In simple terms 4-2 = 2%

Question 4

Nomial GDP

Answer 4

.The value of GDP without being adjusted for inflation. E.g. if inflation was 2% but economic growth was 4% , nominal GDP is still 4%

. Misleading as it makes the GDP value look higher than its really is

Question 5

Total GDP

Answer 5

The combined monetary value of all goods and services produced within a country’s borders during a specific time period

Question 6

GDP per capita

Answer 6

Value of TOTAL GDP divided by the population of the country

Measures average output per person in an economy.

Question 7

Volume of GDP

Answer 7

GDP adjusted for inflation. It is the size of the basket of goods and the real level of GDP

Question 8

Value of GDP

Answer 8

The Monetary value of the basket of goods and services at a given level or prices.

Equal to volume times current price level

Question 9

Gross National Income (GNI)

Answer 9

The value of final goods and services produced by a country over a period of time (GDP) PLUS net overseas interest payments and dividends (factor incomes)

Question 10

GDP definition key terms

Answer 10

‘total market value’

‘final goods and services’

‘produced in an economy’

Question 11

‘Total market value’

Answer 11

The price paid for a good/service. When you add all the prices you get total market value

Question 12

‘final goods and services’

Answer 12

refers to the opposite of intermediate good. A final good is a commodity that is used by the consumer to satisfy current wants or needs. E.g. The tyres sold in are car do not count towards GDP. If the tyres are counted, it is called ‘double counting’ and it is a mistake

Question 13

‘produced in an economy’

Answer 13

produced within a country’s borders. E.g. Apple is an American company, however its devices are made in China. The products produced only count towards China’s GDP.

Question 14

Intermediate Good

Answer 14

.Intermediate goods are referred to as goods that are used by businesses for producing goods or services. E.g. salt is an intermediate good that is used for other

. Opposite of final good

Question 15

Increase in GDP could mean:

Answer 15

. country has produced more goods and services
. same amount of goods and services produced but prices of goods and services has increased
. A combination of both

Question 16

Define recession

Answer 16

Two consequtive quarters of declining real GDP

Question 17

Define disposable income

Answer 17

The total income available to spend after they have paid for their taxes, loan payments, mortgages

Question 18

Economic effects of a fall in Real GDP per capita

Answer 18

. Average living standards decline
. More workers need a second job to supplement their incomes
. Less consumer demand for goods and services
. Lower incomes and low nets savings and people might be more reliant on loans