4.1 National income statistics

Question 1

What is national income?

Answer 1

It is the total amount of money earned within a country

Question 2

What are the ways to measure National income?

Answer 2

GDP - a measure of the value of all the final goods and services produced in a specific time period by a country. It reflects the size and health of an economy
GNI - NI includes GDP plus net income earned from abroad (such as income from foreign investments or remittances) and minus net income paid to foreign entities.

Question 3

What are real values?

Answer 3

• using base prices
• It is adjusted for inflation

Question 4

What are nominal values?

Answer 4

using current prices
no adjustment for inflation

Question 5

What GDP is more useful (real or nominal) to measure standard of living?

Answer 5

Real GDP is more useful
Nominal GDP is always exaggerated and is therefore not a true reflection if the country’s GDP

Question 6

What is the difference between gross values and net values?

Answer 6

Gross values refer to the total value of something without deducting any associated costs or depreciation.
Net value is the value after all expenses and deductions

Question 7

What is GDP?

Answer 7

It is the value of al final goods and services produced in a year

Question 8

What is the problem with using GDP?

Answer 8

Risk of double counting. This is when we include the value of the output in the primary sector and theniinclude again once it’s been manufactured in the secondary sector. Looking at final value can overcome this

Informal or illegal activity.

Errors that are likely to take place. Data can come from loads of sources and needs to happen in a short space of time. Lots of room for error

GDP just looks at output, the quality of output is ignored. Negative externalities of production are ignored.

Income inequality. No mention of the distribution of income. Living standard could be bad.

Question 9

What is GDP/CAPITA and the problems with it.

Answer 9

Gives us an average measure of individual income

Same issues as above. Also remittances are becoming so much more significant. Income sent back home basically.

Does not take into account any factor income earned abroad

Doe snot account for FDI profits going back home

Question 10

What is GNI and the prolems with it?

Answer 10

The total income generated by a countries factors of production regardless of where they are located

Income generated by workers abroad will be counted in GNI.

Fdi income won’t be counted as it is not domestic

GDP + net factor income

Remittances more liekly to be taken into account which is a better representation of living standards