28) National income

Question 1

What is national income?

Answer 1

Measures the monetary value of output of goods and services in an economy over a period of time (usually one year)

Question 2

What are the key uses of national income?

Answer 2

Keep track of:
- The rate of economic growth (real GDP)
- Changes to living standards (real GDP per capita)
- Changes to distribution of income between groups within the population

Question 3

What is GDP?

Answer 3

Gross domestic product (GDP) measures the total value of national output at market prices produced in a given time period

Question 4

What are the 3 ways of calculating GDP?

Answer 4

• National output (of final goods)
• National expenditure (on final goods = AD)
• National income (for all factors of production)

Question 5

What are nominal values?

Answer 5

Values unadjusted for inflation

Question 6

What are real values?

Answer 6

Values adjusted for inflation

Question 7

Can we compare GDP between countries?

Answer 7

Yes, but we must consider:
- Use different calculation methods
- Accuracy
- GDP per capita is much more relevant
- Quality of data collected

Question 8

What is PPP?

Answer 8

Purchasing power parity measures how many units of one country’s currency are needed to buy exactly that basket of goods and services with another countries currency