5.1 - Living Standards

Question 1

Economic Development

Answer 1

The sustainable increase in living standards for a country, typically characterised by increases in life span, education levels, & income

Question 2

Living standards

Answer 2

All the factors that contribute to a person’s well-being and happiness

Question 3

Single indicators of living standards

Answer 3

Seperate factors contributing to the wellbeing of people e.g. real gross domestic product/capita; number of doctors/1000 people; infant mortality rate; % of the population with access to clean drinking water

Question 4

Composite indicators of living standards

Answer 4

A measurement which groups economic and social factors of a population together to get a more precise quality of life e.g. the Human Development Index

Question 5

Nominal

Answer 5

refers to the fact that the metric/measurement has not been adjusted for inflation

Question 6

Nominal GDP

Answer 6

The actual value of all goods/services produced in an economy in a one-year period
* There has been no adjustment to the amount based on the increase in general price levels (inflation)

Question 7

Real GDP

Answer 7

The value of all goods/services produced in an economy in a one-year period - & adjusted for inflation

Question 8

GDP

Answer 8

The total monetary value of all goods and services produced within a country’s borders by any business of individual (even foreign) in a given period of time

Question 9

GNI

Answer 9

Income/value of all goods and services produced by a country’s residents and businesses regardless of their location of work in a given period of time

Question 10

GDP per capita

Answer 10

the average income per person in an economy

Question 11

Advantages of using GDP as an economic development indicator

Answer 11

• GDP is a useful measure of the total production taking place in the country, and so indicates the material well-being of the economy
• takes population into consideration, adding emphasis on the goods and services available to individuals
• since it is calculated on output, is a good indicator of the jobs being created
• GDP data is readily available so is population data

Question 12

Disadvantages of using GDP as an economic development indicator (name 4)

Answer 12

• it takes no account of what people can buy using their incomes
• GDP doesn’t consider changes in technology that can have a large impact on living standards
• distribution of income is very unequal in reality, so the GDP per head isn’t accurate as it gives an average
• excludes the unpaid work people do for charities and voluntary organizations etc. thus, it understates the total output
• also doesn’t differentiate between the positive and negative values economies place on different output/expenditure (e.g. tobacco sales, pornographic material distribution etc.)
• doesn’t consider leisure activities, health and education levels, environmental quality
• in order to effectively compare GDP per head across countries, they need to be converted to a common currency and adjusted for differing purchasing power in different countries

Question 13

The three indicators of HDI

Answer 13

1. Healthcare index
2. Education index
3. Income index

Question 14

HDI

Answer 14

Human development index used by the United Nations to compare living standards across the globe, the HDI combines different measures into one to give a HDI value from 0 (lowest) to 1(highest)

Question 15

Use of the healthcare index in HDI

Answer 15

measured by average life expectancy at birth

Question 16

Use of the education index in HDI

Answer 16

measured by a combination of the mean years of schooling that 25 year olds have received, together with the expected years of schooling for a pre-school child

Question 17

Use of the income index in HDI

Answer 17

measured using the average national income

Question 18

Benefits of using HDI (4)

Answer 18

• it takes into account some major indicators of living standards
• recognises that it is not just output or income that determines living standards, but also social factors
• it is a useful method to compare global living standards– it shows clear patterns of living standards
• it is very useful and reliable measure since its produced by the UN and is thus also widely used and recognised

Question 19

Limitations of using HDI (name 4)

Answer 19

• it combines a set of separate indicators into one, so a country with good literacy rates and living standards but poor life expectancy can have a low HDI value
• there are wide divergences in HDI within countries
• GNI per head doesn’t say anything about inequalities in income and wealth within countries
• it doesn’t consider other factors such as environmental quality, access to safe drinking water, political freedom, crime rates etc. which are also important indicators of living standards
• the HDI information for all countries may not be available such as war-struck countries where civilisation has been disrupted

Question 20

Reasons for differences in living standards (name 5)

Answer 20

• Economic system
• The government
• Corruption
• Tax systems
• Productivity levels
• Size of the population
• Educational levels
• Regional differences
• Personal freedoms
• Inflation