5B Standard of Living & Indicators Flashcards
Define GDP
Gross Domestic Product -> monetary value of final goods & services produced within the geographical boundaries wihtin a year
Define GNI
Gross National Income refers to GDP + factor incomes earned by residents overseas - income earned by non-residents in domestic economy
Define real term
Real -> adjusted for price changes overtime
Real GDP -> Monetary value of all final goods and services produced within a country’s geogrpahical boundaries over a year adjusted for inflation
Define per capita
Adjusted for population changes overtime
What are 3 other indicators to measure material well-being
- Unemployment rate
- Inflation rate
- Balance of trade position
How does unemployment rate measure mSOL
Low Empt -> lower mSOL, greater proportion of labour force unmployed, purchasing power decreases, qty of G&S lower
How Inflation rate measures mSOL
Higher inflation -> lower mSOL assuming inflation increases, nominal remains the same, purchasing power falls, qty of G&S falls, lower mSOL
How balance of trade position measure mSOL
Trade deficit -> not earning enough from exports to pay for imports
Import spending financed by
1) use of foreign currency reserves
2) Borrowing from overseas
3) Selling of assets to foreigners
Country poorer in the future as
1) less foreign currency reserves
2) Pay interest to foreigners
3) Repatriate, send overseas profits & rentals
Sacrifice future mSOL to finance current mSOL
Indicators of non-material SOL
life expectancy
infant mortality
Gini coeff
HDI
Describe Gini coeff
Measures income inequality
0 perfect equality
1 perfect inequality
Limits of Real GDP
Measures only rate of growth of mSOL
[Soln: Purchasing Power Parity -adjusted real GDP capita absolute data]
* Different base year makes comparison of rate of change of MSOL inaccurate
* Different composition
* Different size of non- marketed economy
[Soln: Input estimated value of non-marketed output]
