2.1.1 Measures of GDP

Question 1

What is the point of national statistics and why is it important for the economy?

Answer 1

• they provide a report card for the gov to see how well economic performance is doing.
• they allow to see whether gov is achieving objective of economic growth
• they can evaluate policies whether it has been successful or not it is important for the future’s growth
• they also allow for a comparison of the performance of economy compared to other economies in a world.

Question 2

What is GDP adjusted for?

Answer 2

inflation

Question 3

What is GDP adjusted for?

Answer 3

inflation

Question 4

what are the 3 things a GDP works out?

Answer 4

• income
• output
• expenditure

Question 5

what is the definition of GDP?

Answer 5

the value of all final goods produced in an economy in a year.

Question 6

what are the pros of GDP?

Answer 6

• it gives a measure of growth

- gives a measure of living standards

Question 7

what are the cons of GDP?

Answer 7

there is a risk of double counting- if the output method is being used there will be a risk of double counting which means the value of primary sector is included but when the primary sector is manufactured to the secondary sector it will be counted twice leading to inflation for GDP measures.

Question 8

what is the con of GDP-informal activity?

Answer 8

there may be a rise in black markets so businesses that are operating which have not been registered.
e.g gardening and washing these things are not included because they have market value but are not included in the GDP figures.

Question 9

what are the cons of GDP-data collection?

Answer 9

collecting the value of goods and services produced in an economy in a year, there may be a lack of info which can give error to data collection.

Question 10

what are the cons of gdp?- negative externalities

Answer 10

costs of pollution, resource degradation, resource pollution and costs of air pollution are not mentioned.

• if these costs were included it would actually reduce the living standards in reality
• the distribution of income is not mentioned
• output produced- if only capital goods are produced it will not benefit the consumers
• other quality of life aspects that GDP does not take into account where the level of healthcare,pollution and gender equality is not taken

Question 11

define GDP capita?

Answer 11

this gives us the average measure of individual incomes in the economy?

Question 12

how do you calculate GDP capita?

Answer 12

real gdp/population

Question 13

what is the problem with GDP capita remittances?

Answer 13

this is when workers move to another country to gain a higher disposable income, the good thing is that GDP capita will not take into account any factor income earned above where domestic workers will work and send their income to their families thus improving living standards.

Question 14

what is the problem with GDP capita- FDI?

Answer 14

FDI could distort the final figure when foreign investment business comes and work in domestic countries this counts towards GDP but the problem is that those profits that are being generated these businesses will take these profits back with them.

Question 15

Define GDP per capita?

Answer 15

this is defined as the total income generated by a country’s factors of production regardless of where those factors of production are relocated.

Question 16

what is the benefit of GDP per capita?

Answer 16

factor incomes: as long as domestic factors of production it will be included in GNI e.g incomes generated will count towards GNI per capita despite these domestic workers working abroad

Question 17

how do you calculate GNI?

Answer 17

gdp+ net factor income

Question 18

calculate GNI per capita?

Answer 18

income earned above by domestic workers-income earned by foreign workers/home